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OKLAHOMA LAW ENFORCEMENT
RETIREMENT SYSTEM
ACTUARIAL VALUATION REPORT AS OF
JULY 1, 2011
TABLE OF CONTENTS
SECTION Page No.
Highlights
Purpose 1
Summary of Principal Valuation Results 2
Effects of Changes 3
Deferred Option Plan 4
Certification 5
Section 1 Funding Results 6
1.1 Calculation of Contribution Requirement 7
1.2 Liability Detail 8
1.3 Unfunded Actuarial Accrued Liability 9
1.4 Actuarial Gain/(Loss) 10
1.5 Contributions 11
1.6 Ten-Year Projected Cash Flow 12
Section 2 Accounting Results 13
2.1 ASC 960 Information 14
2.2 GASB No. 25 Information 16
2.3 GASB No. 27 Information 18
Section 3 System Assets 19
3.1 Summary of Assets 20
3.2 Reconciliation of Assets 21
3.3 Actuarial Value of Assets 22
3.4 Average Annual Rates of Investment Return 23
Section 4 Basis of Valuation 24
4.1 System Members 25
4.2 Actuarial Basis 29
4.3 Summary of System Provisions 37
HIGHLIGHTS - PURPOSE Page 1
This report is prepared by Buck Consultants for the Oklahoma Law Enforcement Retirement
System to:
• Present the results of a valuation of the Oklahoma Law Enforcement Retirement System
(the System) as of July 1, 2011;
• Review experience under the System for the year ended June 30, 2011; and
• Provide reporting and disclosure information for auditors’ reports, governmental agencies
and other interested parties.
The main financial highlights are:
• The System’s funding method is the Entry Age Normal (EAN) method. The following
table summarizes the funded status of the System based on this method.
Funded Status ($000,000) July 1, 2011 July 1, 2010
Total Present Value of Benefits $ 1,104.8 $ 1,119.5
Actuarial Accrued Liability $ 900.9 $ 903.6
Actuarial Value of Assets $ 684.1 $ 664.8
Unfunded Actuarial Accrued Liability $ 216.8 $ 238.8
• The funded ratio on an ASC 960 basis, measuring the market value of System assets versus
the present value of benefits accrued as of the valuation date, increased from 73.4% to
86.8%.
• The required State contribution for the System decreased from $42.6 million in 2010/2011
to $41.4 million in 2011/2012.
Contribution Summary ($000,000) July 1, 2011 July 1, 2010
Total Required Contribution $ 54.3 $ 56.0
Expected Member Contributions 5.7 5.9
Expected Agency Contributions 7.2 7.5
Required State Contribution 41.4 42.6
---As a Percentage of Pay 58.3% 58.1%
HIGHLIGHTS – SUMMARY OF PRINCIPAL VALUATION RESULTS Page 2
A summary of principal valuation results from the current valuation and the prior valuation
follows. Any changes in actuarial assumptions, methods or System provisions between the two
valuations are described in the section titled “Effects of Changes.”
Actuarial Valuation as of
July 1, 2011 July 1, 2010
Summary of Costs
Required State Contribution for Current Year $ 41,407,550 $ 42,623,968
Actual State Contribution Received in Prior Year $ 16,964,589 $ 15,455,769
GASB No. 25 Funded Status
Actuarial Accrued Liability $ 900,879,451 $ 903,567,429
Actuarial Value of Assets $ 684,063,000 $ 664,794,000
Unfunded Actuarial Accrued Liability $ 216,816,451 $ 238,773,429
Market Value of Assets and Additional Liabilities
Market Value of Assets $ 713,175,855 $ 603,468,287
Actuarial Present Value of Accumulated System
Benefits (ASC 960) $ 821,652,752 $ 821,935,913
Present Value of Projected System Benefits $ 1,104,836,084 $ 1,119,483,564
Summary of Data
Number of Members in Valuation
Active Members 1,209 1,258
Members with Deferred Benefits 28 22
Retired Members 898 886
Beneficiaries 273 261
Disabled Members 71 69
Deferred Option Plan Members 41 43
Total 2,520 2,539
Active Member Statistics
Total Annual Compensation $ 70,967,284 $ 73,399,682
Average Compensation $ 58,699 $ 58,346
Average Age 41.0 40.5
Average Service 12.1 11.6
HIGHLIGHTS – EFFECTS OF CHANGES Page 3
Legislative Changes
The Oklahoma Pension Legislation Actuarial Analysis Act was modified to change the
definition of a non-fiscal retirement bill and by removing a certain provision that allows a
cost-of-living adjustment (COLA) to be considered non-fiscal, thereby requiring that COLAs
be concurrently funded by the Legislature at the time they are enacted.
Changes in Actuarial Assumptions
Due to the requirement that the Oklahoma Legislature must concurrently fund any cost-of-living
adjustment, the valuation incorporates no assumption for future ad-hoc cost-of-living
adjustments.
There were no other changes to assumptions or methods since the prior valuation. See Section
4.2 for more detail.
Changes in Actuarial Funding Methods
There were no changes in actuarial funding methods.
Changes in System Benefits
There were no changes in plan provisions or system benefits with an actuarial impact as of
July 1, 2011.
Actuarial Experience During the Plan Year
The System experienced the following gains/(losses) during the year ending June 30, 2011.
000’s
Liability Actuarial Gain/(Loss) 41,238
Asset Actuarial Gain/(Loss) (10,968)
Net Actuarial Gain/(Loss) 30,270
HIGHLIGHTS – DEFERRED OPTION PLANPage 4
The Oklahoma Law Enforcement Deferred Option Plan (DROP) allows members eligible for a
Normal Retirement Benefit to defer the receipt of retirement benefits while continuing
employment. Participation in the DROP is limited to five years. During this time, the
members’ contributions stop, but the agencies contribute half of the regular contribution on
base salary to the Law Enforcement Retirement System and the other half to the members’
accounts in the DROP. In addition, the monthly retirement benefits are paid into the members’
accounts in the DROP. The System also allows members to retroactively elect to enter the
DROP as of a back-drop-date upon termination.
The DROP accounts are credited with interest at a rate of 2% less than the total fund net
earnings, with a guaranteed minimum interest rate equal to the valuation interest rate. For
plan years prior to July 1, 2001, the valuation interest rate is 7.0% and for years after
July 1, 2001, the valuation interest rate is 7.5%. The actual rate credited for the fiscal year
ended June 30, 2011, was 19.8%. The assets reflected in these results include the account
balances for the DROP.
Statistics regarding the number of DROP members and total account balances are shown in the
table below:
DROP Statistics July 1, 2011 July 1, 2010
Number of Active Members 41 43
Account Balances $ 3.1 million $ 4.0 million
HIGHLIGHTS – CERTIFICATION Page 5
We have prepared an actuarial valuation of the Oklahoma Law Enforcement Retirement
System as of July 1, 2011, for the plan year ending June 30, 2011. The results of the
valuation are set forth in this report, which reflects the provisions of the System as amended
and effective on July 1, 2011.
The valuation is based on employee and financial data which were provided by the Oklahoma
Law Enforcement Retirement System and the independent auditor, respectively, and which are
summarized in this report.
Any changes in actuarial methods, assumptions and benefit provisions since the last valuation
of the System as of July 1, 2010 are summarized on page 3 and the financial impact, if any,
are incorporated in this report.
Actuarial Certification
The Retirement Board selected the assumptions used for the results in this report. I believe
that these assumptions are reasonable and comply with the requirements of GASB 25. I
prepared this report’s exhibits in accordance with the requirements of these standards.
I am an Enrolled Actuary, Fellow of the Society of Actuaries and a Member of the American
Academy of Actuaries. I meet the Qualification Standards of the American Academy of
Actuaries to render the actuarial opinions contained in this report. This report has been
prepared in accordance with all applicable Actuarial Standards of Practice, and I am available
to answer questions about it.
/s/ DAVID KENT
_____________________________________________ October 7, 2011
David Kent, FSA, EA, MAAA
SECTION 1: FUNDING RESULTS Page 6
Section 1.1 Calculation of Contribution Requirement
Section 1.2 Liability Detail
Section 1.3 Unfunded Actuarial Accrued Liability
Section 1.4 Actuarial Gain/(Loss)
Section 1.5 Contributions
Section 1.6 Ten-Year Projected Cash Flow
SECTION 1.1 Page 7
CALCULATION OF CONTRIBUTION REQUIREMENT
C. Summary of Contribution
Requirements
Actuarial Valuation as of
July 1, 2011 July 1, 2010
Amount
% of
Active
Covered
Comp.
Amount
% of
Active
Covered
Comp.
1. Annual Covered Compensation
for Members Included in
Valuation
a. Active Members $ 70,967,284 100% $ 73,399,682 100.0%
b. Deferred Option Plan
Members $ 2,596,529 N/A $ 2,608,472 N/A
c. Total $ 73,563,813 N/A $ 76,008,154 N/A
2. Total Normal Cost Mid-year $ 22,416,729 31.6% $ 23,309,427 31.8%
3. Unfunded Actuarial Accrued
Liability $ 216,816,451 305.5% $ 238,773,429 325.3%
4. Amortization of Unfunded
Actuarial Accrued Liability over
20 years From July 1, 2001 Mid-year
(1) $ 30,465,310 42.9% $ 31,480,546 42.9%
5. Budgeted Expenses $ 1,429,448 2.0% $ 1,176,362 1.6%
6. Total Required Contribution
(2 + 4 + 5) $ 54,311,487 76.5% $ 55,966,335 76.2%
7. Estimated Member Contribution
(8% x 1a) $ 5,677,383 8.0% $ 5,871,975 8.0%
8. Estimated Employer
Contribution
a. Active Members $ 7,096,728 10.0% $ 7,339,968 10.0%
b. Deferred Option Plan
Members $ 129,826
5.0%
(2)
$ 130,424 5.0% (2)
c. Total $ 7,226,554 10.2% $ 7,470,392 10.2%
9. Required State Contribution
(6 - 7 - 8c) Not less than $0 $ 41,407,550 58.3%
$ 42,623,968 58.1%
10. Previous year’s actual State
Contribution (4)
$ 16,964,589
23.1%(3) $ 15,455,769 20.5% (3)
(1) Funding Policy adopted by Board, effective July 1, 2001.
(2) Percentage of Deferred Option Plan compensation.
(3) Percent of previous years’ annual compensation for active members $73,399,682 in 2010/2011 and $75,320,336 in
2009/2010.
(4) 5.0% of collected statewide insurance premium taxes have been allocated to the Oklahoma Law Enforcement Retirement
System.
SECTION 1.2 Page 8
LIABILITY DETAIL
Total
Present Value of Benefits $ 1,104,836,084
Present Value of Future Normal Cost $ 203,956,633
Accrued Liability $ 900,879,451
Normal Cost Mid-Year $ 22,416,729
Active – Accrued Liability
a. Retirement $ 341,567,776
b. Disability 2,910,348
c. Withdrawal 7,417,683
d. Death 5,291,207
e. Refunds (2,253,129)
f. Health 3,668,445
g. Total $ 358,602,330
Inactive – Accrued Liability
1. Members Eligible for Automatic COLA
a. Retired Members $ 13,989,519
b. Disabled Members 1,088,345
c. Beneficiaries 19,691,396
d. Total $ 34,769,260
2. Members Not Eligible for Automatic COLA
a. Retired Members $ 376,905,889
b. Disabled Members 22,032,713
c. Terminated Vested Members 6,388,517
d. Beneficiaries 62,197,464
e. Deferred Option Plan Members Annuities 28,998,896
f. Deferred Option Plan Members Account Balances 3,105,503
g. Total $ 499,628,982
3. Health $ 7,878,879
4. Total Inactive (1d + 2g + 3) $ 542,277,121
Accrued Liability (Active + Inactive) $ 900,879,451
SECTION 1.3 Page 9
UNFUNDED ACTUARIAL ACCRUED LIABILITY
The actuarial accrued liability is the present value of projected system benefits allocated to past
service by the actuarial funding method being used.
Total System
July 1, 2011 July 1, 2010
1. Actuarial Present Value of Benefits
a. Active Members $ 562,558,963 $ 576,870,962
b. Members with Deferred Benefits $ 6,708,413 $ 5,038,465
c. Members Receiving Benefits $ 503,464,309 $ 505,084,540
d. Deferred Option Plan Members (1) $ 32,104,399 $ 32,489,597
e. Total $ 1,104,836,084 $ 1,119,483,564
2. Actuarial Present Value of Future Normal Costs $ 203,956,633 $ 215,916,135
3. Total Actuarial Accrued Liability (1e- 2) $ 900,879,451 $ 903,567,429
4. Actuarial Value of Assets $ 684,063,000 $ 664,794,000
5. Unfunded Actuarial Accrued Liability
(3 - 4) $ 216,816,451 $ 238,773,429
(1) Includes DROP account balances and value of future benefit payments.
SECTION 1.4 Page 10
ACTUARIAL GAIN/(LOSS)
The actuarial gain/(loss) is comprised of both the liability gain/(loss) and the actuarial asset
gain/(loss). Each of these represents the difference between the expected and actual values as of
July 1, 2011.
Regular Deferred Option Total
1. Expected Actuarial Accrued Liability
a. Actuarial Accrued Liability at
July 1, 2010 $ 899,569,706 $ 3,997,723 $ 903,567,429
b. Normal Cost at July 1, 2010 and DROP
contributions 22,481,607 103,355 22,584,962
c. Benefit Payments for Plan Year Ending
June 30, 2011 (46,906,243) (1,919,446) (48,825,689)
d. Interest on a + b + c to End of Year 67,426,664 923,871 68,350,535
e. Expected Actuarial Accrued Liability
Before Changes (a + b + c + d) $ 942,571,734 3,105,503 945,677,237
f. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Actuarial
Assumptions $ (3,560,154) $ 0 $ (3,560,154)
g. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Plan
Provisions 0 0 0
h. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Method 0 0 0
i. Expected Actuarial Accrued Liability at
July 1, 2011 (e + f + g +h) $ 939,011,580 $ 3,105,503 $ 942,117,083
2. Actuarial Accrued Liability at July 1, 2011 $ 897,773,948 $ 3,105,503 $ 900,879,451
3. Actuarial Liability Gain/(Loss) (1i – 2) $ 41,237,632 $ 0 $ 41,237,632
4. Expected Actuarial Value of Assets
a. Actuarial Value of Assets at
July 1, 2010 $ 660,796,277 $ 3,997,723 $ 664,794,000
b. Contributions Made for Plan Year Ending
June 30, 2011 30,047,931 103,355 30,151,286
c. Benefit Payments and Expenses for Plan
Year Ending June 30, 2011 (47,823,979) (1,919,446) (49,743,425)
d. Interest on a + b + c to End of Year 48,905,170 923,871 49,829,041
e. Expected Actuarial Value of Assets at
July 1, 2011 (a + b + c + d) $ 691,925,399 $ 3,105,503 $ 695,030,902
5. Actuarial Value of Assets as of July 1, 2011 $ 680,957,497 $ 3,105,503 $ 684,063,000
6. Actuarial Asset Gain/(Loss) (5 - 4e) $ (10,967,902) $ 0 $ (10,967,902)
7. Actuarial Gain/(Loss) (3 + 6) $ 30,269,730 $ 0 $ 30,269,730
SECTION 1.5 Page 11
CONTRIBUTIONS
Contributions to the System are made by the Members, Agencies, and the State of Oklahoma.
Member contributions equal 8% of base salary. The agencies contribute 10% of base salary.
The State contribution is based on revenues from various taxes and fees.
The Deferred Option Plan Members do not make employee contributions to the System.
However, agencies continue contributing for them. 50% of the agency contribution is credited
as an increase to the member’s account balance and the System retains the remaining portion
of the agency contribution for purposes of paying benefits. The System should receive
approximately $130,000 from this source during the current plan year.
In 2003-2004, State funding from the Insurance Premium Tax was not paid although other
state taxes and fees were paid. For fiscal years ending 2005 – 2009, 6.1% of the State
Insurance Premium Tax was paid to the Retirement System. 5.0% will be paid for fiscal years
ending 2010 and later. Beginning in fiscal year July 1, 2006, the System received 9% of a
special allocation established to refund the System for reduced allocations of insurance
premium taxes resulting in an increase in insurance premium tax credits.
State Contributions Received versus
Contributions Required by Funding Policy
(millions)
0
5
10
15
20
25
30
35
40
45
2001-
2002
2002-
2003
2003-
2004
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
2009-
2010
2010-
2011
2011-
2012
Actual Required
SECTION 1.6 Page 12
TEN-YEAR PROJECTED CASH FLOW
(RETIREMENT BENEFIT PAYMENTS) (1)
Plan Year Ending Actives Inactives (2) Total
6/30/2012 7,146,465 42,890,492 50,036,957
6/30/2013 7,464,026 42,492,372 49,956,398
6/30/2014 9,272,408 42,557,187 51,829,595
6/30/2015 10,927,270 42,863,596 53,790,866
6/30/2016 13,039,804 43,199,543 56,239,347
6/30/2017 15,007,731 43,448,690 58,456,421
6/30/2018 17,042,488 43,682,527 60,725,015
6/30/2019 19,652,311 43,922,193 63,574,504
6/30/2020 22,581,379 44,079,811 66,661,190
6/30/2021 25,812,553 44,167,734 69,980,287
(1) Includes supplemental health benefits to retirees.
(2) Includes Deferred Option Plan Members, Disabled Members, Beneficiaries and Terminated Vested
Members.
SECTION 2: ACCOUNTING RESULTS Page 13
Section 2.1 ASC 960 Information
Section 2.2 GASB No. 25 Information
Section 2.3 GASB No. 27 Information
SECTION 2.1 Page 14
ASC 960 INFORMATION
A. Actuarial Present Value of Accumulated System Benefits
The actuarial present value of vested and nonvested accumulated system benefits was
computed on an ongoing system basis in order to provide required information under
Accounting Standards Codification 960. In this calculation, a determination is made of all
benefits earned by current Members as of the valuation date; the actuarial present value is then
computed using demographic assumptions and an assumed interest rate. Assumptions
regarding future salary and accrual of future benefit service are not necessary for this purpose.
Accumulated System Benefits July 1, 2011 July 1, 2010
Vested Benefits
a. Active Members $ 252,443,775 $ 253,482,519
b. Deferred Option Plan Members 32,104,399 32,390,778
c. Members with Deferred Benefits 6,388,517 5,023,511
d. Members Receiving Benefits 503,784,205 503,809,081
e. Total Vested Benefits $ 794,720,896 $ 794,705,889
Nonvested Benefits 26,931,856 27,230,024
Total Accumulated System Benefits $ 821,652,752 $ 821,935,913
Assumed Rate of Interest 7.5% 7.5%
Market Value of Assets Available for Benefits $ 713,175,855 $ 603,468,287
Funded Ratio 86.8% 73.4%
Number of Members July 1, 2011 July 1, 2010
Vested Members
a. Active Members 673 676
b. Deferred Option Plan Members 41 43
c. Members with Deferred Benefits 28 22
d. Members Receiving Benefits 1,242 1,216
e. Total Vested Members 1,984 1,957
Nonvested Members 536 582
Total Members 2,520 2,539
SECTION 2.1 Page 15
ASC 960 INFORMATION (CONTINUED)
B. Statement of Changes in Accumulated System Benefits
A statement of changes in the actuarial present value of accumulated system benefits follows.
This statement shows the effect of certain events on the actuarial present value shown on the
previous page.
Actuarial Present Value of Accumulated System Benefits as of
July 1, 2010 $ 821,935,913
Increase/(Decrease) During Year Attributable to:
a. Normal Cost 22,352,181
b. Increase for Interest due to Decrease in Discount Period 61,490,644
c. Benefits Paid (48,825,689)
d. System Provision Changes 0
e. Assumption Changes 0
f. (Gains)/Losses (35,300,297)
Net Increase/(Decrease) (283,161)
Actuarial Present Value of Accumulated System Benefits as of
July 1, 2011 $ 821,652,752
The benefits valued include all benefits (retirement, preretirement death and vested
termination) payable from the System for member service prior to the valuation date. Benefits
are assumed to accrue/(accumulate) in accordance with the system provisions.
SECTION 2.2 Page 16
GASB NO. 25 INFORMATION
Supplementary Schedules
The GASB has issued a statement; Financial Reporting for Defined Benefit and Note
Disclosures for Defined Contribution Plans (GASB Statement No. 25). This standard became
effective for periods beginning after June 15, 1996, and requires funding status to be measured
based upon the actuarial funding method adopted by the Board of Retirement, i.e., for the
Oklahoma Law Enforcement Retirement System, the Entry Age Normal Cost Method for all
years except July 1, 1997 and the Aggregate Method for July 1, 1997. This GASB standard
supersedes GASB Statement No. 5 in its entirety.
A. Schedules of Funding Progress
The GASB Statement No. 25 liabilities and assets resulting from the last six actuarial
valuations are as follows:
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(AAL)
Entry Age
(b)
Unfunded
AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage
of Covered
Payroll
((b-a)/c)
7/1/2006 $ 651,671,000 $ 772,269,163 $ 120,598,163 84.4% $ 57,115,506 211.1%
7/1/2007 $ 697,560,000 $ 840,556,507 $ 142,996,507 83.0% $ 63,764,374 224.3%
7/1/2008 $ 730,589,000 $ 881,317,682 $ 150,728,682 82.9% $ 73,507,820 205.1%
7/1/2009 $ 659,908,000 $ 892,016,574 $ 232,108,574 74.0% $ 75,320,336 308.2%
7/1/2010 $ 664,794,000 $ 903,567,429 $ 238,773,429 73.6% $ 73,399,682 325.3%
7/1/2011 $ 684,063,000 $ 900,879,451 $ 216,816,451 75.9% $ 70,967,284 305.5%
SECTION 2.2 Page 17
GASB NO. 25 INFORMATION (CONTINUED)
B. Schedule of Employer Contributions
The GASB Statement No. 25 Agency and State required contributions for the last six fiscal
years are as follows:
Year Ended June 30
Annual Required
Contribution
Percentage Contributed
2006 $ 30,005,975 73.39%
2007 $ 32,503,327 75.20%
2008 $ 32,667,877 76.60%
2009 $ 36,615,719 67.98%
2010 $ 48,102,643 48.10%
2011 $ 50,094,360 49.02%
SECTION 2.3 Page 18
GASB NO. 27 INFORMATION
Transition to GASB No.27 as if adopted GASB No. 27 June 30, 1996
Fiscal Year Ending June 30
2011 2012
ARC 50,094,360 48,634,104
Interest on NPO 2,862,717 4,615,419
Adjustment to ARC (5,032,375) (8,646,993)
Actual Pension Cost 47,924,702 44,602,530
Contribution Made 24,555,337 N/A
Increase in NPO 23,369,365 N/A
NPO BOY 38,169,557 61,538,922
NPO EOY 61,538,922 N/A
Interest Rate 7.50% 7.5%
Amortization Period 11 10
Amortization Factor 7.5848 7.1168
SECTION 3: SYSTEM ASSETS Page 19
This section presents information regarding System assets as reported by the System
administrator or independent auditor. The System assets represent the portion of total System
liabilities, which has been funded as of the valuation date.
Section 3.1 Summary of Assets
Section 3.2 Reconciliation of Assets
Section 3.3 Actuarial Value of Assets
Section 3.4 Average Annual Rates of Investment Return
SECTION 3.1 Page 20
SUMMARY OF ASSETS
Asset Category
Market Value as of
June 30, 2011
Market Value as of
June 30, 2010
1. Cash and Short-term Investments $ 11,841,024 $ 10,307,844
2. Receivables $ 4,573,633 $ 4,421,824
3. Investments at fair value
a. Domestic Corporate Bonds $ 158,784,033 $ 149,509,572
b. U.S. Government Bonds 65,300,893 48,149,474
c. Domestic Stock 285,138,714 231,002,822
d. International Stock 140,997,834 114,970,037
e. Real Estate 36,666,985 29,636,927
f. Other 22,237,385 18,416,472
g. Total $ 709,125,844 $ 591,685,304
4. Total Assets 725,540,501 $ 606,414,972
5. Liabilities (12,364,646) $ (2,946,685)
6. Net Assets for Pension Benefits(1)
(including DROP assets) $ 713,175,855 $ 603,468,287
(1) Includes DROP assets in the amounts of $3,105,503 for 2011 and of $3,997,723 for 2010.
SECTION 3.2 Page 21
RECONCILIATION OF ASSETS
Transactions June 30, 2011 June 30, 2010
Additions
1. Contributions
a. Contributions from Plan Members $ 5,492,594 $ 5,638,870
b. Contributions from Agencies 7,694,103 7,778,735
c. Contributions from other State Sources 16,964,589 15,455,769
d. Total $ 30,151,286 $ 28,873,374
2. Net Investment Income $ 129,299,707 $ 71,516,362
3. Total Additions $ 159,450,993 $ 100,389,736
4. Retirement and Health Benefits $ (48,186,388) $ (45,503,100)
5. Refund of Contributions $ (639,301) $ (337,374)
6. Other Contributions Paid Out $ 0 $ (3)
7. Administrative Expenses $ (917,736) $ (1,004,453)
8. Total Deductions $ (49,743,425) $ (46,844,930)
9. Net Increase $ 109,707,568 $ 53,544,806
10. Net Assets held in Trust for Pension Benefits
a. Beginning of Year $ 603,468,287 $ 549,923,481
b. End of Year $ 713,175,855 $ 603,468,287
11. DROP Assets (included above)
a. Beginning of Year $ 3,997,723 $ 4,946,687
b. End of Year $ 3,105,503 $ 3,997,723
SECTION 3.3 Page 22
ACTUARIAL VALUE OF ASSETS
Schedule of Assets Gains/(Losses)
Year Original Amount
Recognized in Prior
Years
Recognized This
Year
Recognized in
Future Years
2006/2007 54,090,423 43,272,340 10,818,083 0
2007/2008 (115,135,951) (69,081,570) (23,027,190) (23,027,191)
2008/2009 (162,607,500) (65,043,000) (32,521,500) (65,043,000)
2009/2010 89,344,073 17,868,815 17,868,815 53,606,443
2010/2011 79,470,493 0 15,894,099 63,576,394
Total (54,838,462) (72,983,415) (10,967,693) 29,112,646
Development of Actuarial Value of Assets
1. Actuarial Value as of July 1, 2010 (Excluding DROP) $ 660,796,277
2. Contributions
a. Member $ 5,492,594
b. Employer (Excluding DROP) 7,590,748
c. State 16,964,589
d. Total $ 30,047,931
3. Decreases During the Year
a. Benefit Payments (Excluding payments from DROP,
including payments to DROP) $ (46,266,942)
b. Return of Member Contributions (639,301)
c. Noninvestment Expenses (917,736)
d. Total (a.+b.+c.) $ (47,823,979)
4. Expected Return at 7.5% on:
a. Item 1 $ 49,559,721
b. Item 2 (one-half year) 1,106,427
c. Item 3 (one-half year) (1,760,978)
d. Total (a.+b.+c.) $ 48,905,170
5. Expected Actuarial Value of Assets (Excluding DROP) June 30, 2011
(1.+2.+3.+4.) $ 691,925,399
6. Unrecognized Asset Gain/(Loss) as of June 30, 2010 $ (61,325,540)
7. DROP Assets $ 3,105,503
8. Expected Actuarial Value June 30, 2011 plus Previous Year’s Unrecognized Asset
Gain/(Loss) (5.+6.+7.) $ 633,705,362
9. Market Value June 30, 2011 $ 713,175,855
10. 2009/2010 Asset Gain/(Loss) (9.-8.) $ 79,470,493
11. Asset Gain/(Loss) to be Recognized as of June 30, 2011 $ (10,967,693)
12. Initial Actuarial Value July 1, 2011 (5. + 7. + 11.) $ 684,063,209
13. Constraining Values:
a. 80% of Market Value (9. x 0.8) $ 570,540,684
b. 120% of Market Value (9. x 1.2) 855,811,026
14. Actuarial Value July 1, 2011 (12), but not less than (13a), nor greater than (13b) --
rounded to nearest 1,000 $ 684,063,000
SECTION 3.4 Page 23
AVERAGE ANNUAL RATES OF INVESTMENT RETURN
Year Ending
June 30
Actuarial Value Market Value
Annual Cumulative Annual Cumulative
1990 8.6% 8.6% 12.8% 12.8%
1991 8.6% 8.6% 9.0% 10.9%
1992 9.7% 9.0% 13.8% 11.8%
1993 9.9% 9.2% 11.1% 11.7%
1994 8.6% 9.1% (0.5%) 9.1%
1995 9.3% 9.1% 16.5% 10.3%
1996 11.4% 9.4% 18.7% 11.5%
1997 12.5% 9.8% 16.8% 12.1%
1998 14.0% 10.3% 17.2% 12.7%
1999 14.2% 10.7% 6.9% 12.1%
2000 12.2% 10.8% 6.0% 11.5%
2001 9.4% 10.6% 1.9% 10.6%
2002 6.5% 10.2% (2.2%) 9.4%
2003 4.0% 9.9% 2.9% 9.1%
2004 5.4% 9.6% 16.1% 9.6%
2005 5.7% 9.3% 9.2% 9.6%
2006 6.6% 9.2% 7.9% 9.5%
2007 10.0% 9.2% 15.6% 9.8%
2008 7.2% 9.1% (8.5%) 8.8%
2009 (7.7%) 8.2% (16.3%) 7.3%
2010 3.5% 8.0% 13.2% 7.6%
2011 5.9% 7.9% 21.8% 8.2%
Annual Returns before 1998 exclude DROP assets.
SECTION 4: BASIS OF VALUATION Page 24
This section presents and describes the basis of the valuation. The census of Members,
actuarial basis and benefit provisions of the System are the foundation of the valuation, since
these are the present facts on which the projection of benefit payments will depend. The
valuation is based on the premise that the System will continue in existence.
Section 4.1 System Members
Section 4.2 Actuarial Basis
Section 4.3 Summary of System Provisions
SECTION 4.1 Page 25
SYSTEM MEMBERS
A. Member Statistics
Inactive Members as of July 1, 2011 Number
Amount of
Annual Benefit
Members Receiving Benefits
a. Retired 898 $ 29,918,860
b. Beneficiaries 273 8,575,204
c. Disabled 71 1,962,020
Total 1,242 $ 40,456,084
Members with Deferred Benefits
a. Vested Terminated 28 $ 399,876
Total 1,270 $ 40,855,960
Deferred Option Plan Members 41 $ 1,633,504
Statistics for Active
Members
Number
Average
Age Service Earnings
As of July 1, 2010
a. Continuing 1,229 40.6 11.9 $ 58,840
b. New 29 33.2 1.0 37,447
Total 1,258 40.5 11.6 $ 58,346
As of July 1, 2011
a. Continuing 1,178 41.2 12.4 $ 59,293
b. New 31 33.4 0.6 36,128
Total 1,209 41.0 12.1 $ 58,699
SECTION 4.1 Page 26
SYSTEM MEMBERS (CONTINUED)
B. Count of Active Members
Years of Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+ Total
Under 20 0
20-24 15 1 16
25-29 87 34 121
30-34 80 101 36 217
35-39 43 52 136 9 240
40-44 35 34 78 51 19 1 218
45-49 16 14 32 27 72 20 2 183
50-54 1 6 10 13 33 40 11 114
55-59 5 9 11 5 14 17 13 3 77
60-64 1 2 7 3 4 3 2 22
65-69 0
70-74 1 1
75+ 0
Total 283 253 311 108 142 81 28 3 0 1,209
C. Average Compensation
Years of Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+ Total
Under 20 0
20-24 37,710 54,562 38,763
25-29 45,851 53,204 47,917
30-34 44,099 56,578 62,932 53,032
35-39 44,924 54,071 64,062 65,853 58,535
40-44 51,595 57,917 63,390 67,169 65,290 57,360 61,665
45-49 44,460 53,651 62,680 65,168 68,663 69,474 69,926 63,939
50-54 38,982 76,454 62,025 58,624 63,811 70,666 72,493 66,753
55-59 48,389 53,841 53,934 52,450 59,789 67,076 74,405 71,863 61,587
60-64 78,176 66,908 62,315 63,781 60,015 68,655 70,335 64,829
65-69 0
70-74 70,576 70,576
75+ 0
Total 45,550 56,075 63,178 64,755 65,965 69,380 73,043 71,863 0 58,699
SECTION 4.1 Page 27
SYSTEM MEMBERS (CONTINUED)
D. Members in Pay Status - Annual Benefits
Attained
Age
Retired Members Beneficiaries
Disabled
Members
Current Payment
Total
No. Benefit No. Benefit No. Benefit No. Benefit
Under 50 27 $ 781,523 15 $ 300,718 3 $ 76,317 45 $ 1,158,558
50-54 67 1,858,964 19 407,805 7 181,545 93 2,448,314
55-59 139 4,490,549 22 620,631 12 301,335 173 5,412,515
60-64 195 6,757,040 28 788,064 15 462,905 238 8,008,009
65-69 184 6,342,940 33 980,065 18 488,001 235 7,811,006
70-74 149 4,998,379 46 1,494,276 7 186,002 202 6,678,657
75-79 86 2,931,988 35 1,252,969 6 164,997 127 4,349,954
80-84 31 1,020,860 28 1,000,738 3 100,918 62 2,122,516
85-89 16 575,121 27 1,037,742 43 1,612,863
90 and over 4 161,496 20 692,196 24 853,692
Total 898 $ 29,918,860 273 $ 8,575,204 71 $ 1,962,020 1,242 $ 40,456,084
E. Terminated Vested and Deferred Option Plan Members - Annual Benefits
Attained Age
Terminated Vested Members Deferred Option Plan Members
No. Benefit No. Benefit
Under 40 7 $ 91,604 0 $ 0
40-44 11 158,258 1 31,727
45-49 3 38,975 3 126,331
50-54 2 37,337 11 399,143
55-59 3 38,256 13 572,602
60-64 2 35,446 12 476,234
65 and over 0 0 1 27,467
Total 28 $ 399,876 41 $ 1,633,504
SECTION 4.1 Page 28
SYSTEM MEMBERS (CONTINUED)
F. Member Data Reconciliation
Active Members Inactive Members
Regular
Deferred
Option
Plan
Deferred
Vested
Members
Retired
Members
Disabled
Members
Bene-ficiaries
Total
As of July 1, 2010 1,258 43 22 886 69 261 2,539
To Deferred Option
Plan (14) 14 0 0 0 0 0
Age Retirements (21) (14) (3) 38 0 0 0
Disability
Retirements (1) 0 (1) 0 2 0 0
Deaths Without
Beneficiaries 0 (2) 0 (4) 0 (12) (18)
Deaths With
Beneficiaries 0 0 0 (22) 0 22 0
Nonvested
Terminations (34) 0 0 0 0 0 (34)
Vested Terminations (10) 0 10 0 0 0 0
Rehires 0 0 0 0 0 0 0
Expiration of
Benefits 0 0 0 0 0 (1) (1)
Data Corrections 0 0 0 0 0 0 0
Net Change (80) (2) 6 12 2 9 (53)
New Entrants
During the Year 31 0 0 0 0 3 34
As of July l, 2011 1,209 41 28 898 71 273 2,520
SECTION 4.2 Page 29
ACTUARIAL BASIS
A. Entry Age Actuarial Cost Method
Liabilities and contributions shown in this report are computed using the Individual Entry
Age method of funding.
Sometimes called “funding method,” this is a particular technique used by actuaries for
establishing the annual actuarial cost of pension plan benefits, or normal cost, and the
related unfunded actuarial accrued liability. Ordinarily the annual contribution to the
system is comprised of (1) the normal cost and (2) an amortization payment on the
unfunded actuarial accrued liability.
Under the Entry Age Actuarial Cost Method, the Normal Cost is computed as the level
percentage of pay which, if paid from the earliest time each Member would have been
eligible to join the system if it then existed (thus, entry age) until his retirement or
termination, would accumulate with interest at the rate assumed in the valuation to a fund
sufficient to pay all benefits under the system.
The Actuarial Accrued Liability under this method at any point in time is the theoretical
amount of the fund that would have accumulated had annual contributions equal to the
normal cost been made in prior years (it does not represent the liability for benefits
accrued to the valuation date.) The Unfunded Actuarial Accrued Liability is the excess
of the actuarial accrued liability over the actuarial value of system assets actually on hand
on the valuation date.
Under this method experience gains or losses, i.e. decreases or increases in accrued
liabilities attributable to deviations in experience from the actuarial assumptions, adjust
the unfunded actuarial accrued liability.
Actuarial Present Value
The current worth (on the valuation date) of an amount or series of amounts payable or
receivable in the future. The actuarial present value is determined by discounting the
future payments at a predetermined rate of interest, taking into account the probability of
payment.
Present Value of Accrued System Benefit (ASC 960)
The present value of accrued system benefits represents the actuarial present value of
benefits which are accrued based on service and salary information as of the valuation
date.
SECTION 4.2 Page 30
ACTUARIAL BASIS (CONTINUED)
B. Asset Valuation Method
The actuarial value of assets is based on a five-year moving average of expected and
market values determined as follows:
• at the beginning of each plan year, a preliminary expected actuarial asset value is
calculated as the sum of the previous year’s actuarial value increased with a year’s
interest at the System valuation rate plus net cash flow adjusted for interest (at the
same rate) to the end of the previous plan year;
• the expected actuarial asset value is set equal to the preliminary expected actuarial
value plus the unrecognized investment gains and losses as of the beginning of the
previous plan year;
• the difference between the expected actuarial asset value and the market value is the
investment gain or loss for the previous plan year;
• the (final) actuarial asset value is the preliminary value plus 20% of the investment
gains and losses for each of the five previous plan years, but in no case more than
120% of the market value or less than 80% of the market value.
SECTION 4.2 Page 31
ACTUARIAL BASIS (CONTINUED)
C. Valuation Procedures
No actuarial accrued liability is held for nonvested, inactive Members who have a break
in service, or for nonvested Members who have quit or been terminated, even if a break
in service had not occurred as of the valuation date.
The wages used in the projection of benefits and liabilities are pay for the year ending
June 30, 2011 (including longevity bonuses). These pays were projected into the
valuation year using the valuation salary scale.
In computing accrued benefits, average earnings were determined using the valuation
salary progression. Historical earnings for the past five years have been retained.
Retired Members were assumed to be married with a beneficiary if a spouse date of birth
was provided on the data tape. For those Members whose data did not have a spouse’s
date of birth, they were assumed to be single.
The impact from the dollar limitation required by the Internal Revenue Code Section 415
for governmental plans was considered in this valuation and was determined not to be
significant on a projected basis.
The compensation limit under IRC Section 401(a)(17) was considered in this valuation.
On a projected basis, the impact of this limitation is insignificant.
No additional liability is being carried for the guaranteed minimum interest rate for the
Deferred Option Plan account balances. Stochastic studies of similar Systems have been
used to quantify the cost of this benefit. Further review and analysis of this liability is
recommended. Please note that this is a volatile benefit and the impact in any one-year
may be large.
All active, deferred vested and deferred option plan members are assumed to elect the
$105 per month retiree medical benefit upon retirement.
The calculations for the required state contribution are determined as of mid-year. This is
a reasonable assumption since the agency contributions, member contributions and State
insurance premium tax allocations are made on a monthly basis throughout the year, and
mid-year represents an average weighting of the contributions.
The contribution requirements are based on total annual compensation rather than total
covered compensation. This is a better reflection of the overall expectations for the
System.
SECTION 4.2 Page 32
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions
Economic Assumptions
1. Investment Return 7.5%, net of investment expenses, per annum, compound
annually.
2. Earnings Progression Sample rates below:
Attained
Service
Inflation Merit Increase
% % %
0 3.25 5.00 8.25
5 3.25 3.75 7.00
10 3.25 2.45 5.70
15 3.25 1.25 4.50
20 3.25 1.20 4.45
25 or more 3.25 1.00 4.25
SECTION 4.2 Page 33
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions
1. Retirement Rates Sample rates below:
Attained
Service
Annual Rates of
Retirement Per 100
Eligible Members
20 23
21 11
22 10
23 10
24 12
25 12
26 20
27 20
28 25
29 30
30 50
over 30 100
or 100% at age 75 without regard to
years of service.
2. Mortality Rates
(a) Active employees RP-2000 Blue Collar Healthy Employees (pre-retirement)
with Generational Projection from RP-2000 study
All pre-retirement deaths are assumed to occur in the line
of duty.
(b) Active employees RP-2000 Blue Collar Healthy Annuitant
(post-retirement) and with Generational Projection from RP-2000 study
nondisabled pensioners
(c) Disabled pensioners RP-2000 Blue Collar Healthy Annuitant (set forward 7
years) No Projection
SECTION 4.2 Page 34
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions (continued)
3. Disability Rates
See table below:
Age
Rate (Per 100
Members)
20 0.004
30 0.108
40 0.346
50 1.040
60 1.900
33% of disabilities are assumed to
be Non-Duty related and 67% are
assumed to be Duty related.
4. Withdrawal Rates See table below:
Service
Range
Rate (Per 100
Members)
0 15.00
2 5.75
4 4.00
6 2.50
8 2.50
10 1.75
15 1.00
20 and over 0.00
SECTION 4.2 Page 35
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions (continued)
5. Marital Status
(a) Percentage married: Males: 85%; Females: 85%
(b) Age difference: Males are assumed to be three (3) years older than
females.
Other Assumptions
1. Assumed Age of Commencement
for Deferred Benefits: Age 50.
2. Actuarial Value of Assets: An expected actuarial value is determined equal to the
prior year’s Actuarial Value of Assets plus cash flow
(excluding investment returns) for the year ended on
the valuation date and assuming 7.5% interest return.
The (gain)/loss is measured by the difference between
the expected actuarial value and the market value at
the valuation date. The (gain)/loss is amortized over
five years by 20% per year. The result is constrained
to a value of 80% to 120% of the market value at the
valuation date.
3. Provision for Expenses: Administrative Expenses, as budgeted by the
Oklahoma Law Enforcement Retirement System.
4. Retiree Medical: All active and terminated vested members are assumed
to elect the $105 per month retiree medical benefit
upon retirement, and their surviving spouses are
assumed to continue the benefit.
SECTION 4.2 Page 36
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Other Assumptions (continued)
5. Deferred Option Plan: Deferred Option Plan (DOP) members are assumed to
remain in the DOP for the maximum of five years
prior to electing a lump sum.
A member is allowed to retroactively elect to join the
DOP as of a back-drop-date which is no earlier than
the member’s normal retirement date or five years
before his termination date. The monthly retirement
benefits and employee contributions that would have
been payable had the member elected to join the DOP
are credited to the member’s DOP account with
interest. The retirement benefits are not recalculated
for service and salary past the election date to join the
DOP. However, the benefits may be increased by any
applicable cost-of-living increases.
The retirement rates reflect both regular retirement
and entry into the DOP. We assume that 50% of
active members who retire elect to retroactively enter
into the DOP.
6. Cost-of-Living Allowance: Members eligible for the automatic cost-of-living
increase are assumed to have their benefits increase by
3.25% per year. Members not eligible for the
automatic cost-of-living increase are assumed to
receive the greater of:
(i) their benefit calculated using their actual final
average earnings.
(ii) their benefit calculated using the top base pay for
active members, assuming 3.25% annual
increases in the top base pay.
7. Cost of Living Increase
Assumption: 0% per year
SECTION 4.3 Page 37
SUMMARY OF SYSTEM PROVISIONS
Effective Date and Plan Year: The System became effective July 1, 1947. The System was
originally known as the Oklahoma Public Safety Retirement
System. The plan year is July 1 to June 30.
Administration: The System is administered by the Oklahoma Law
Enforcement Retirement Board consisting of thirteen
Members. The Board acts as the fiduciary for investment and
administration of the System.
Type of Plan: A defined benefit plan.
Eligibility: All law enforcement officers of the Oklahoma Highway
Patrol (OHP) and Capitol Patrol of Department of Public
Safety, Oklahoma State Bureau of Investigation (OSBI),
Oklahoma State Bureau of Narcotics and Dangerous Drugs
Control (OBNDD), Alcoholic Beverage Laws Enforcement
Commission (ABLE), members of the DPS Communications
Division (Communications), DPS Waterways Lake Patrol
Division (Lake Patrol), Park Rangers of the Oklahoma
Tourism and Recreation Department (Rangers), Inspectors of
the Oklahoma State Board of Pharmacy (Pharmacy
Inspectors), and Gun Smith’s of DPS are eligible upon
employment.
Service Considered: Credited Service shall consist of the period during which the
Member participated in the System or the predecessor Plan as
an active employee in an eligible membership classification,
plus any service prior to the establishment of the predecessor
Plan which was credited under the predecessor Plan for
officers of the OSBI and the OBNDD who became Members
of the System on July 1, 1980, any service credited under the
Oklahoma Public Employees Retirement System (OPERS) as
of June 30, 1980, and for Members of Communications and
Lake Patrol who became Members of the System on
July 1, 1981, any service credited under the predecessor Plan
or OPERS as of June 30, 1981, and for law enforcement
officers of ABLE who became Members of the System on
July 1, 1982, any service credited under OPERS as of
June 30, 1982, and for Rangers who became Members of the
System on July 1, 1985, any service credited under OPERS
as of June 30, 1985, and for Pharmacy Inspectors who
became Members.
SECTION 4.3 Page 38
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
of the System on July 1, 1986, any service credited under
OPERS as of June 30, 1986 and for Capitol Patrol who
became Members of the System on July 1, 1993, any
service credited under OPERS as of June 30, 1993 and
for Gun Smith’s who became Members of the System on
July 1, 1994, any service credited under OPERS as of
July 1, 1994. Members can accumulate up to 6 months 15
days sick leave which counts for pension accrual and
benefits eligibility purposes. Members may also buy back
service with other Oklahoma State Retirement Systems.
Salary Considered: Actual paid base salary received by a Member, excluding
payment for any accumulated leave or uniform allowance.
Lump sum bonuses based on longevity date go into
considered compensation. The lump sum bonus is $250
after 2 or 3 years, $426 after 4 or 5 years, $626 after 6 or
7 years, and so on. If an employee incurs a break in
service in excess of 30 days, his longevity date is changed
to his date of rehire and the longevity bonus amount
becomes $0. If an employee incurs a break in service of
less than 30 days or is on a leave of absence without pay
for more than 30 days, his length of absence is deducted
from his longevity date and the longevity bonus amount
remains the same.
Final average salary means the average of the highest 30
consecutive complete months of considered salary.
Effective July 1, 2002: Members whose salary is set by
statute and retire after 20 years receive a benefit based on
the greater of the member’s highest 30 consecutive
months or the top base pay paid to active members at the
time of payment.
Members whose salary is not set by statute and who retire
after 20 years receive a benefit based on the greater of the
member’s highest 30 consecutive months or the salary
paid to the highest non-supervisory position in the
participating agency at the time payment is made.
SECTION 4.3 Page 39
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
State Contributions: License Agency Fees equal to 1.2% of Drivers License
Taxes, plus Motor Vehicle Inspection Fees equal to 50
cents per motor vehicle inspection sticker less $850,000,
plus 5% of Insurance Premium Tax.
Agency Contributions: 10% of actual base salary.
Member Contributions: Eight (8%) percent of paid salary. Accumulated
contributions are after-tax up to December 31, 1989 and
before-tax after December 31, 1989.
Normal Retirement Benefit:
Eligibility: 20 years of service or age 62 with 10 years of service.
Maximum of age 60 with at least 20 years of service,
unless physically able to continue.
Benefit: 2 1/2% of the greater of final average salary or the salary
paid to active employees as described under “salary
considered” multiplied by the years and completed
months of credited service. There is no maximum on
service.
Form of Benefit: 100% joint and survivor.
Form of Payments: The normal form of benefit is a Joint and 100% Survivor
Annuity if the Member was married 30 months prior to
death. The Joint and Survivor portion continues to eligible
children under 22 if there is no eligible spouse or after the
spouse dies.
Termination:
Less Than 10 Years of Service: A refund of contributions without interest.
SECTION 4.3 Page 40
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
More than 10 Years of Service: If greater than 10 years of service, but not eligible for the
normal retirement benefit, the benefit is payable at the
date the Member would have had 20 years of service in
an amount equal to 2 1/2% of the greater of final average
salary or the salary paid to active employees as described
under “salary considered” multiplied by the years and
completed months of credited service.
Form of Benefit: Lifetime benefit.
Disability Benefit (Duty): Upon determination of disability incurred as a result of
the performance of duty, the normal disability benefit is
the greater of:
1) 2 1/2% of the greater of final average salary or the
salary paid to active employees as described under
“salary considered” times years and completed
months of credited service, or
2) 50% of final average salary.
For members with less than 20 years of service that incur
a line of duty disability due to personal injury of a
catastrophic nature, final average salary is based on the
salary which the member would have received pursuant to
statutory salary schedules in effect upon the date of death
for a twenty (20) years of service member.
Disability Benefit (Non-Duty): Upon determination of disability after three years of
service due to causes other than duty, the benefit equals
the accrued benefit of 2 1/2% of the greater of final
average salary or the salary paid to active employees as
described under “salary considered” times years and
completed months of credited service.
SECTION 4.3 Page 41
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
Death Benefits Payable
to Beneficiaries:
Prior to Retirement (Duty): The greater of:
1) 2 1/2% of the greater of final average salary or the
salary paid to active employees as described under
“salary considered” times years and completed
months of credited service, or
2) 50% of final average salary.
For members with less than 20 years of service that die in
the line of duty, final average salary is based on the salary
which the member would have received pursuant to
statutory salary schedules in effect upon the date of death
for a twenty (20) years of service member.
Prior to Retirement
(Non-Duty): After three years of service, the greater of:
1) 2 1/2% of the greater of final salary or the salary paid
to active employees as described under “salary
considered” times years and completed months of
credited service, or
2) 50% of final average salary.
After Retirement: In addition to the benefits provided under the 100% Joint
and Survivor Annuity, $400 per month is paid for each
surviving child to age 18, or to age 22 if a full-time
student (12 semester hours) in an accredited school of
learning.
Lump Sum: The beneficiary shall receive a lump-sum amount of
$5,000. Effective July 1, 2002, this lump sum is
considered to be life insurance proceeds for tax purposes.
If an active Member dies prior to retirement without
leaving a beneficiary, a refund of the accumulated
contributions made by the Member will be paid to the
estate.
SECTION 4.3 Page 42
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
If the beneficiary is a child, the benefits are payable to
age 18, or to age 22 if a full-time student (12 semester
hours) in an accredited school of learning. If the
beneficiary is a spouse (to whom the Member was
married for at least 30 months prior to death, if the death
was not duty related), the benefits are payable for life.
Postretirement Adjustments: Occasional ad hoc increases for retirees are provided.
COLAs apply to the whole benefit, not the original
benefit. The most recent COLA was 4% for Members
retired as of June 30, 2007, effective July 1, 2008.
Effective July 1, 2002, retirement benefits will be
recalculated to increase in conjunction with increases to
the top base pay for active members.
Postretirement Health
Insurance Benefits: The System will contribute $105 per month or the
Medicare Supplement Premium, if less, toward the cost of
health insurance for annuitants receiving retirement
benefits. These benefits commence upon retirement.
Spouses become eligible for this benefit as of
July 1, 2002.
Deferred Option Plan: A Member who has 20 or more years of service and
continues employment may elect to participate in the
Deferred Option Plan. Participation in the Deferred
Option Plan shall not exceed five years. The members’
contributions cease upon entering the Plan, but the agency
contributions are divided equally between the Retirement
System and Deferred Option Plan. The monthly
retirement benefits that the member is eligible to receive
are paid into the Deferred Option Plan account.
Members can elect to retroactively join the DROP as of a
back-drop-date which is no earlier than the member's
normal retirement date or five years before his
termination date. The monthly retirement benefits and
employee contributions that would have been payable had
the member elected to join the DROP are credited to the
member's DROP account with interest.
SECTION 4.3 Page 43
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
The retirement benefits are not recalculated for service
and salary past the election date to join the Deferred
Option Plan. However, the benefits are increased by
cost-of-living increases applicable to retired members.
When the Member actually terminates employment, the
Deferred Option Plan account balance may be paid in a
lump sum or to an annuity provider. Monthly retirement
benefits are then paid directly to the retired Member.
This Plan became effective during the July 1, 1991 to
June 30, 1992 Plan Year. The Deferred Option Plan
account is guaranteed a minimum of the valuation interest
rate for investment return, or 2% less than the fund rate
of return, if greater.

OKLAHOMA LAW ENFORCEMENT
RETIREMENT SYSTEM
ACTUARIAL VALUATION REPORT AS OF
JULY 1, 2011
TABLE OF CONTENTS
SECTION Page No.
Highlights
Purpose 1
Summary of Principal Valuation Results 2
Effects of Changes 3
Deferred Option Plan 4
Certification 5
Section 1 Funding Results 6
1.1 Calculation of Contribution Requirement 7
1.2 Liability Detail 8
1.3 Unfunded Actuarial Accrued Liability 9
1.4 Actuarial Gain/(Loss) 10
1.5 Contributions 11
1.6 Ten-Year Projected Cash Flow 12
Section 2 Accounting Results 13
2.1 ASC 960 Information 14
2.2 GASB No. 25 Information 16
2.3 GASB No. 27 Information 18
Section 3 System Assets 19
3.1 Summary of Assets 20
3.2 Reconciliation of Assets 21
3.3 Actuarial Value of Assets 22
3.4 Average Annual Rates of Investment Return 23
Section 4 Basis of Valuation 24
4.1 System Members 25
4.2 Actuarial Basis 29
4.3 Summary of System Provisions 37
HIGHLIGHTS - PURPOSE Page 1
This report is prepared by Buck Consultants for the Oklahoma Law Enforcement Retirement
System to:
• Present the results of a valuation of the Oklahoma Law Enforcement Retirement System
(the System) as of July 1, 2011;
• Review experience under the System for the year ended June 30, 2011; and
• Provide reporting and disclosure information for auditors’ reports, governmental agencies
and other interested parties.
The main financial highlights are:
• The System’s funding method is the Entry Age Normal (EAN) method. The following
table summarizes the funded status of the System based on this method.
Funded Status ($000,000) July 1, 2011 July 1, 2010
Total Present Value of Benefits $ 1,104.8 $ 1,119.5
Actuarial Accrued Liability $ 900.9 $ 903.6
Actuarial Value of Assets $ 684.1 $ 664.8
Unfunded Actuarial Accrued Liability $ 216.8 $ 238.8
• The funded ratio on an ASC 960 basis, measuring the market value of System assets versus
the present value of benefits accrued as of the valuation date, increased from 73.4% to
86.8%.
• The required State contribution for the System decreased from $42.6 million in 2010/2011
to $41.4 million in 2011/2012.
Contribution Summary ($000,000) July 1, 2011 July 1, 2010
Total Required Contribution $ 54.3 $ 56.0
Expected Member Contributions 5.7 5.9
Expected Agency Contributions 7.2 7.5
Required State Contribution 41.4 42.6
---As a Percentage of Pay 58.3% 58.1%
HIGHLIGHTS – SUMMARY OF PRINCIPAL VALUATION RESULTS Page 2
A summary of principal valuation results from the current valuation and the prior valuation
follows. Any changes in actuarial assumptions, methods or System provisions between the two
valuations are described in the section titled “Effects of Changes.”
Actuarial Valuation as of
July 1, 2011 July 1, 2010
Summary of Costs
Required State Contribution for Current Year $ 41,407,550 $ 42,623,968
Actual State Contribution Received in Prior Year $ 16,964,589 $ 15,455,769
GASB No. 25 Funded Status
Actuarial Accrued Liability $ 900,879,451 $ 903,567,429
Actuarial Value of Assets $ 684,063,000 $ 664,794,000
Unfunded Actuarial Accrued Liability $ 216,816,451 $ 238,773,429
Market Value of Assets and Additional Liabilities
Market Value of Assets $ 713,175,855 $ 603,468,287
Actuarial Present Value of Accumulated System
Benefits (ASC 960) $ 821,652,752 $ 821,935,913
Present Value of Projected System Benefits $ 1,104,836,084 $ 1,119,483,564
Summary of Data
Number of Members in Valuation
Active Members 1,209 1,258
Members with Deferred Benefits 28 22
Retired Members 898 886
Beneficiaries 273 261
Disabled Members 71 69
Deferred Option Plan Members 41 43
Total 2,520 2,539
Active Member Statistics
Total Annual Compensation $ 70,967,284 $ 73,399,682
Average Compensation $ 58,699 $ 58,346
Average Age 41.0 40.5
Average Service 12.1 11.6
HIGHLIGHTS – EFFECTS OF CHANGES Page 3
Legislative Changes
The Oklahoma Pension Legislation Actuarial Analysis Act was modified to change the
definition of a non-fiscal retirement bill and by removing a certain provision that allows a
cost-of-living adjustment (COLA) to be considered non-fiscal, thereby requiring that COLAs
be concurrently funded by the Legislature at the time they are enacted.
Changes in Actuarial Assumptions
Due to the requirement that the Oklahoma Legislature must concurrently fund any cost-of-living
adjustment, the valuation incorporates no assumption for future ad-hoc cost-of-living
adjustments.
There were no other changes to assumptions or methods since the prior valuation. See Section
4.2 for more detail.
Changes in Actuarial Funding Methods
There were no changes in actuarial funding methods.
Changes in System Benefits
There were no changes in plan provisions or system benefits with an actuarial impact as of
July 1, 2011.
Actuarial Experience During the Plan Year
The System experienced the following gains/(losses) during the year ending June 30, 2011.
000’s
Liability Actuarial Gain/(Loss) 41,238
Asset Actuarial Gain/(Loss) (10,968)
Net Actuarial Gain/(Loss) 30,270
HIGHLIGHTS – DEFERRED OPTION PLANPage 4
The Oklahoma Law Enforcement Deferred Option Plan (DROP) allows members eligible for a
Normal Retirement Benefit to defer the receipt of retirement benefits while continuing
employment. Participation in the DROP is limited to five years. During this time, the
members’ contributions stop, but the agencies contribute half of the regular contribution on
base salary to the Law Enforcement Retirement System and the other half to the members’
accounts in the DROP. In addition, the monthly retirement benefits are paid into the members’
accounts in the DROP. The System also allows members to retroactively elect to enter the
DROP as of a back-drop-date upon termination.
The DROP accounts are credited with interest at a rate of 2% less than the total fund net
earnings, with a guaranteed minimum interest rate equal to the valuation interest rate. For
plan years prior to July 1, 2001, the valuation interest rate is 7.0% and for years after
July 1, 2001, the valuation interest rate is 7.5%. The actual rate credited for the fiscal year
ended June 30, 2011, was 19.8%. The assets reflected in these results include the account
balances for the DROP.
Statistics regarding the number of DROP members and total account balances are shown in the
table below:
DROP Statistics July 1, 2011 July 1, 2010
Number of Active Members 41 43
Account Balances $ 3.1 million $ 4.0 million
HIGHLIGHTS – CERTIFICATION Page 5
We have prepared an actuarial valuation of the Oklahoma Law Enforcement Retirement
System as of July 1, 2011, for the plan year ending June 30, 2011. The results of the
valuation are set forth in this report, which reflects the provisions of the System as amended
and effective on July 1, 2011.
The valuation is based on employee and financial data which were provided by the Oklahoma
Law Enforcement Retirement System and the independent auditor, respectively, and which are
summarized in this report.
Any changes in actuarial methods, assumptions and benefit provisions since the last valuation
of the System as of July 1, 2010 are summarized on page 3 and the financial impact, if any,
are incorporated in this report.
Actuarial Certification
The Retirement Board selected the assumptions used for the results in this report. I believe
that these assumptions are reasonable and comply with the requirements of GASB 25. I
prepared this report’s exhibits in accordance with the requirements of these standards.
I am an Enrolled Actuary, Fellow of the Society of Actuaries and a Member of the American
Academy of Actuaries. I meet the Qualification Standards of the American Academy of
Actuaries to render the actuarial opinions contained in this report. This report has been
prepared in accordance with all applicable Actuarial Standards of Practice, and I am available
to answer questions about it.
/s/ DAVID KENT
_____________________________________________ October 7, 2011
David Kent, FSA, EA, MAAA
SECTION 1: FUNDING RESULTS Page 6
Section 1.1 Calculation of Contribution Requirement
Section 1.2 Liability Detail
Section 1.3 Unfunded Actuarial Accrued Liability
Section 1.4 Actuarial Gain/(Loss)
Section 1.5 Contributions
Section 1.6 Ten-Year Projected Cash Flow
SECTION 1.1 Page 7
CALCULATION OF CONTRIBUTION REQUIREMENT
C. Summary of Contribution
Requirements
Actuarial Valuation as of
July 1, 2011 July 1, 2010
Amount
% of
Active
Covered
Comp.
Amount
% of
Active
Covered
Comp.
1. Annual Covered Compensation
for Members Included in
Valuation
a. Active Members $ 70,967,284 100% $ 73,399,682 100.0%
b. Deferred Option Plan
Members $ 2,596,529 N/A $ 2,608,472 N/A
c. Total $ 73,563,813 N/A $ 76,008,154 N/A
2. Total Normal Cost Mid-year $ 22,416,729 31.6% $ 23,309,427 31.8%
3. Unfunded Actuarial Accrued
Liability $ 216,816,451 305.5% $ 238,773,429 325.3%
4. Amortization of Unfunded
Actuarial Accrued Liability over
20 years From July 1, 2001 Mid-year
(1) $ 30,465,310 42.9% $ 31,480,546 42.9%
5. Budgeted Expenses $ 1,429,448 2.0% $ 1,176,362 1.6%
6. Total Required Contribution
(2 + 4 + 5) $ 54,311,487 76.5% $ 55,966,335 76.2%
7. Estimated Member Contribution
(8% x 1a) $ 5,677,383 8.0% $ 5,871,975 8.0%
8. Estimated Employer
Contribution
a. Active Members $ 7,096,728 10.0% $ 7,339,968 10.0%
b. Deferred Option Plan
Members $ 129,826
5.0%
(2)
$ 130,424 5.0% (2)
c. Total $ 7,226,554 10.2% $ 7,470,392 10.2%
9. Required State Contribution
(6 - 7 - 8c) Not less than $0 $ 41,407,550 58.3%
$ 42,623,968 58.1%
10. Previous year’s actual State
Contribution (4)
$ 16,964,589
23.1%(3) $ 15,455,769 20.5% (3)
(1) Funding Policy adopted by Board, effective July 1, 2001.
(2) Percentage of Deferred Option Plan compensation.
(3) Percent of previous years’ annual compensation for active members $73,399,682 in 2010/2011 and $75,320,336 in
2009/2010.
(4) 5.0% of collected statewide insurance premium taxes have been allocated to the Oklahoma Law Enforcement Retirement
System.
SECTION 1.2 Page 8
LIABILITY DETAIL
Total
Present Value of Benefits $ 1,104,836,084
Present Value of Future Normal Cost $ 203,956,633
Accrued Liability $ 900,879,451
Normal Cost Mid-Year $ 22,416,729
Active – Accrued Liability
a. Retirement $ 341,567,776
b. Disability 2,910,348
c. Withdrawal 7,417,683
d. Death 5,291,207
e. Refunds (2,253,129)
f. Health 3,668,445
g. Total $ 358,602,330
Inactive – Accrued Liability
1. Members Eligible for Automatic COLA
a. Retired Members $ 13,989,519
b. Disabled Members 1,088,345
c. Beneficiaries 19,691,396
d. Total $ 34,769,260
2. Members Not Eligible for Automatic COLA
a. Retired Members $ 376,905,889
b. Disabled Members 22,032,713
c. Terminated Vested Members 6,388,517
d. Beneficiaries 62,197,464
e. Deferred Option Plan Members Annuities 28,998,896
f. Deferred Option Plan Members Account Balances 3,105,503
g. Total $ 499,628,982
3. Health $ 7,878,879
4. Total Inactive (1d + 2g + 3) $ 542,277,121
Accrued Liability (Active + Inactive) $ 900,879,451
SECTION 1.3 Page 9
UNFUNDED ACTUARIAL ACCRUED LIABILITY
The actuarial accrued liability is the present value of projected system benefits allocated to past
service by the actuarial funding method being used.
Total System
July 1, 2011 July 1, 2010
1. Actuarial Present Value of Benefits
a. Active Members $ 562,558,963 $ 576,870,962
b. Members with Deferred Benefits $ 6,708,413 $ 5,038,465
c. Members Receiving Benefits $ 503,464,309 $ 505,084,540
d. Deferred Option Plan Members (1) $ 32,104,399 $ 32,489,597
e. Total $ 1,104,836,084 $ 1,119,483,564
2. Actuarial Present Value of Future Normal Costs $ 203,956,633 $ 215,916,135
3. Total Actuarial Accrued Liability (1e- 2) $ 900,879,451 $ 903,567,429
4. Actuarial Value of Assets $ 684,063,000 $ 664,794,000
5. Unfunded Actuarial Accrued Liability
(3 - 4) $ 216,816,451 $ 238,773,429
(1) Includes DROP account balances and value of future benefit payments.
SECTION 1.4 Page 10
ACTUARIAL GAIN/(LOSS)
The actuarial gain/(loss) is comprised of both the liability gain/(loss) and the actuarial asset
gain/(loss). Each of these represents the difference between the expected and actual values as of
July 1, 2011.
Regular Deferred Option Total
1. Expected Actuarial Accrued Liability
a. Actuarial Accrued Liability at
July 1, 2010 $ 899,569,706 $ 3,997,723 $ 903,567,429
b. Normal Cost at July 1, 2010 and DROP
contributions 22,481,607 103,355 22,584,962
c. Benefit Payments for Plan Year Ending
June 30, 2011 (46,906,243) (1,919,446) (48,825,689)
d. Interest on a + b + c to End of Year 67,426,664 923,871 68,350,535
e. Expected Actuarial Accrued Liability
Before Changes (a + b + c + d) $ 942,571,734 3,105,503 945,677,237
f. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Actuarial
Assumptions $ (3,560,154) $ 0 $ (3,560,154)
g. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Plan
Provisions 0 0 0
h. Change in Actuarial Accrued Liability at
July 1, 2011 due to changes in Method 0 0 0
i. Expected Actuarial Accrued Liability at
July 1, 2011 (e + f + g +h) $ 939,011,580 $ 3,105,503 $ 942,117,083
2. Actuarial Accrued Liability at July 1, 2011 $ 897,773,948 $ 3,105,503 $ 900,879,451
3. Actuarial Liability Gain/(Loss) (1i – 2) $ 41,237,632 $ 0 $ 41,237,632
4. Expected Actuarial Value of Assets
a. Actuarial Value of Assets at
July 1, 2010 $ 660,796,277 $ 3,997,723 $ 664,794,000
b. Contributions Made for Plan Year Ending
June 30, 2011 30,047,931 103,355 30,151,286
c. Benefit Payments and Expenses for Plan
Year Ending June 30, 2011 (47,823,979) (1,919,446) (49,743,425)
d. Interest on a + b + c to End of Year 48,905,170 923,871 49,829,041
e. Expected Actuarial Value of Assets at
July 1, 2011 (a + b + c + d) $ 691,925,399 $ 3,105,503 $ 695,030,902
5. Actuarial Value of Assets as of July 1, 2011 $ 680,957,497 $ 3,105,503 $ 684,063,000
6. Actuarial Asset Gain/(Loss) (5 - 4e) $ (10,967,902) $ 0 $ (10,967,902)
7. Actuarial Gain/(Loss) (3 + 6) $ 30,269,730 $ 0 $ 30,269,730
SECTION 1.5 Page 11
CONTRIBUTIONS
Contributions to the System are made by the Members, Agencies, and the State of Oklahoma.
Member contributions equal 8% of base salary. The agencies contribute 10% of base salary.
The State contribution is based on revenues from various taxes and fees.
The Deferred Option Plan Members do not make employee contributions to the System.
However, agencies continue contributing for them. 50% of the agency contribution is credited
as an increase to the member’s account balance and the System retains the remaining portion
of the agency contribution for purposes of paying benefits. The System should receive
approximately $130,000 from this source during the current plan year.
In 2003-2004, State funding from the Insurance Premium Tax was not paid although other
state taxes and fees were paid. For fiscal years ending 2005 – 2009, 6.1% of the State
Insurance Premium Tax was paid to the Retirement System. 5.0% will be paid for fiscal years
ending 2010 and later. Beginning in fiscal year July 1, 2006, the System received 9% of a
special allocation established to refund the System for reduced allocations of insurance
premium taxes resulting in an increase in insurance premium tax credits.
State Contributions Received versus
Contributions Required by Funding Policy
(millions)
0
5
10
15
20
25
30
35
40
45
2001-
2002
2002-
2003
2003-
2004
2004-
2005
2005-
2006
2006-
2007
2007-
2008
2008-
2009
2009-
2010
2010-
2011
2011-
2012
Actual Required
SECTION 1.6 Page 12
TEN-YEAR PROJECTED CASH FLOW
(RETIREMENT BENEFIT PAYMENTS) (1)
Plan Year Ending Actives Inactives (2) Total
6/30/2012 7,146,465 42,890,492 50,036,957
6/30/2013 7,464,026 42,492,372 49,956,398
6/30/2014 9,272,408 42,557,187 51,829,595
6/30/2015 10,927,270 42,863,596 53,790,866
6/30/2016 13,039,804 43,199,543 56,239,347
6/30/2017 15,007,731 43,448,690 58,456,421
6/30/2018 17,042,488 43,682,527 60,725,015
6/30/2019 19,652,311 43,922,193 63,574,504
6/30/2020 22,581,379 44,079,811 66,661,190
6/30/2021 25,812,553 44,167,734 69,980,287
(1) Includes supplemental health benefits to retirees.
(2) Includes Deferred Option Plan Members, Disabled Members, Beneficiaries and Terminated Vested
Members.
SECTION 2: ACCOUNTING RESULTS Page 13
Section 2.1 ASC 960 Information
Section 2.2 GASB No. 25 Information
Section 2.3 GASB No. 27 Information
SECTION 2.1 Page 14
ASC 960 INFORMATION
A. Actuarial Present Value of Accumulated System Benefits
The actuarial present value of vested and nonvested accumulated system benefits was
computed on an ongoing system basis in order to provide required information under
Accounting Standards Codification 960. In this calculation, a determination is made of all
benefits earned by current Members as of the valuation date; the actuarial present value is then
computed using demographic assumptions and an assumed interest rate. Assumptions
regarding future salary and accrual of future benefit service are not necessary for this purpose.
Accumulated System Benefits July 1, 2011 July 1, 2010
Vested Benefits
a. Active Members $ 252,443,775 $ 253,482,519
b. Deferred Option Plan Members 32,104,399 32,390,778
c. Members with Deferred Benefits 6,388,517 5,023,511
d. Members Receiving Benefits 503,784,205 503,809,081
e. Total Vested Benefits $ 794,720,896 $ 794,705,889
Nonvested Benefits 26,931,856 27,230,024
Total Accumulated System Benefits $ 821,652,752 $ 821,935,913
Assumed Rate of Interest 7.5% 7.5%
Market Value of Assets Available for Benefits $ 713,175,855 $ 603,468,287
Funded Ratio 86.8% 73.4%
Number of Members July 1, 2011 July 1, 2010
Vested Members
a. Active Members 673 676
b. Deferred Option Plan Members 41 43
c. Members with Deferred Benefits 28 22
d. Members Receiving Benefits 1,242 1,216
e. Total Vested Members 1,984 1,957
Nonvested Members 536 582
Total Members 2,520 2,539
SECTION 2.1 Page 15
ASC 960 INFORMATION (CONTINUED)
B. Statement of Changes in Accumulated System Benefits
A statement of changes in the actuarial present value of accumulated system benefits follows.
This statement shows the effect of certain events on the actuarial present value shown on the
previous page.
Actuarial Present Value of Accumulated System Benefits as of
July 1, 2010 $ 821,935,913
Increase/(Decrease) During Year Attributable to:
a. Normal Cost 22,352,181
b. Increase for Interest due to Decrease in Discount Period 61,490,644
c. Benefits Paid (48,825,689)
d. System Provision Changes 0
e. Assumption Changes 0
f. (Gains)/Losses (35,300,297)
Net Increase/(Decrease) (283,161)
Actuarial Present Value of Accumulated System Benefits as of
July 1, 2011 $ 821,652,752
The benefits valued include all benefits (retirement, preretirement death and vested
termination) payable from the System for member service prior to the valuation date. Benefits
are assumed to accrue/(accumulate) in accordance with the system provisions.
SECTION 2.2 Page 16
GASB NO. 25 INFORMATION
Supplementary Schedules
The GASB has issued a statement; Financial Reporting for Defined Benefit and Note
Disclosures for Defined Contribution Plans (GASB Statement No. 25). This standard became
effective for periods beginning after June 15, 1996, and requires funding status to be measured
based upon the actuarial funding method adopted by the Board of Retirement, i.e., for the
Oklahoma Law Enforcement Retirement System, the Entry Age Normal Cost Method for all
years except July 1, 1997 and the Aggregate Method for July 1, 1997. This GASB standard
supersedes GASB Statement No. 5 in its entirety.
A. Schedules of Funding Progress
The GASB Statement No. 25 liabilities and assets resulting from the last six actuarial
valuations are as follows:
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(AAL)
Entry Age
(b)
Unfunded
AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage
of Covered
Payroll
((b-a)/c)
7/1/2006 $ 651,671,000 $ 772,269,163 $ 120,598,163 84.4% $ 57,115,506 211.1%
7/1/2007 $ 697,560,000 $ 840,556,507 $ 142,996,507 83.0% $ 63,764,374 224.3%
7/1/2008 $ 730,589,000 $ 881,317,682 $ 150,728,682 82.9% $ 73,507,820 205.1%
7/1/2009 $ 659,908,000 $ 892,016,574 $ 232,108,574 74.0% $ 75,320,336 308.2%
7/1/2010 $ 664,794,000 $ 903,567,429 $ 238,773,429 73.6% $ 73,399,682 325.3%
7/1/2011 $ 684,063,000 $ 900,879,451 $ 216,816,451 75.9% $ 70,967,284 305.5%
SECTION 2.2 Page 17
GASB NO. 25 INFORMATION (CONTINUED)
B. Schedule of Employer Contributions
The GASB Statement No. 25 Agency and State required contributions for the last six fiscal
years are as follows:
Year Ended June 30
Annual Required
Contribution
Percentage Contributed
2006 $ 30,005,975 73.39%
2007 $ 32,503,327 75.20%
2008 $ 32,667,877 76.60%
2009 $ 36,615,719 67.98%
2010 $ 48,102,643 48.10%
2011 $ 50,094,360 49.02%
SECTION 2.3 Page 18
GASB NO. 27 INFORMATION
Transition to GASB No.27 as if adopted GASB No. 27 June 30, 1996
Fiscal Year Ending June 30
2011 2012
ARC 50,094,360 48,634,104
Interest on NPO 2,862,717 4,615,419
Adjustment to ARC (5,032,375) (8,646,993)
Actual Pension Cost 47,924,702 44,602,530
Contribution Made 24,555,337 N/A
Increase in NPO 23,369,365 N/A
NPO BOY 38,169,557 61,538,922
NPO EOY 61,538,922 N/A
Interest Rate 7.50% 7.5%
Amortization Period 11 10
Amortization Factor 7.5848 7.1168
SECTION 3: SYSTEM ASSETS Page 19
This section presents information regarding System assets as reported by the System
administrator or independent auditor. The System assets represent the portion of total System
liabilities, which has been funded as of the valuation date.
Section 3.1 Summary of Assets
Section 3.2 Reconciliation of Assets
Section 3.3 Actuarial Value of Assets
Section 3.4 Average Annual Rates of Investment Return
SECTION 3.1 Page 20
SUMMARY OF ASSETS
Asset Category
Market Value as of
June 30, 2011
Market Value as of
June 30, 2010
1. Cash and Short-term Investments $ 11,841,024 $ 10,307,844
2. Receivables $ 4,573,633 $ 4,421,824
3. Investments at fair value
a. Domestic Corporate Bonds $ 158,784,033 $ 149,509,572
b. U.S. Government Bonds 65,300,893 48,149,474
c. Domestic Stock 285,138,714 231,002,822
d. International Stock 140,997,834 114,970,037
e. Real Estate 36,666,985 29,636,927
f. Other 22,237,385 18,416,472
g. Total $ 709,125,844 $ 591,685,304
4. Total Assets 725,540,501 $ 606,414,972
5. Liabilities (12,364,646) $ (2,946,685)
6. Net Assets for Pension Benefits(1)
(including DROP assets) $ 713,175,855 $ 603,468,287
(1) Includes DROP assets in the amounts of $3,105,503 for 2011 and of $3,997,723 for 2010.
SECTION 3.2 Page 21
RECONCILIATION OF ASSETS
Transactions June 30, 2011 June 30, 2010
Additions
1. Contributions
a. Contributions from Plan Members $ 5,492,594 $ 5,638,870
b. Contributions from Agencies 7,694,103 7,778,735
c. Contributions from other State Sources 16,964,589 15,455,769
d. Total $ 30,151,286 $ 28,873,374
2. Net Investment Income $ 129,299,707 $ 71,516,362
3. Total Additions $ 159,450,993 $ 100,389,736
4. Retirement and Health Benefits $ (48,186,388) $ (45,503,100)
5. Refund of Contributions $ (639,301) $ (337,374)
6. Other Contributions Paid Out $ 0 $ (3)
7. Administrative Expenses $ (917,736) $ (1,004,453)
8. Total Deductions $ (49,743,425) $ (46,844,930)
9. Net Increase $ 109,707,568 $ 53,544,806
10. Net Assets held in Trust for Pension Benefits
a. Beginning of Year $ 603,468,287 $ 549,923,481
b. End of Year $ 713,175,855 $ 603,468,287
11. DROP Assets (included above)
a. Beginning of Year $ 3,997,723 $ 4,946,687
b. End of Year $ 3,105,503 $ 3,997,723
SECTION 3.3 Page 22
ACTUARIAL VALUE OF ASSETS
Schedule of Assets Gains/(Losses)
Year Original Amount
Recognized in Prior
Years
Recognized This
Year
Recognized in
Future Years
2006/2007 54,090,423 43,272,340 10,818,083 0
2007/2008 (115,135,951) (69,081,570) (23,027,190) (23,027,191)
2008/2009 (162,607,500) (65,043,000) (32,521,500) (65,043,000)
2009/2010 89,344,073 17,868,815 17,868,815 53,606,443
2010/2011 79,470,493 0 15,894,099 63,576,394
Total (54,838,462) (72,983,415) (10,967,693) 29,112,646
Development of Actuarial Value of Assets
1. Actuarial Value as of July 1, 2010 (Excluding DROP) $ 660,796,277
2. Contributions
a. Member $ 5,492,594
b. Employer (Excluding DROP) 7,590,748
c. State 16,964,589
d. Total $ 30,047,931
3. Decreases During the Year
a. Benefit Payments (Excluding payments from DROP,
including payments to DROP) $ (46,266,942)
b. Return of Member Contributions (639,301)
c. Noninvestment Expenses (917,736)
d. Total (a.+b.+c.) $ (47,823,979)
4. Expected Return at 7.5% on:
a. Item 1 $ 49,559,721
b. Item 2 (one-half year) 1,106,427
c. Item 3 (one-half year) (1,760,978)
d. Total (a.+b.+c.) $ 48,905,170
5. Expected Actuarial Value of Assets (Excluding DROP) June 30, 2011
(1.+2.+3.+4.) $ 691,925,399
6. Unrecognized Asset Gain/(Loss) as of June 30, 2010 $ (61,325,540)
7. DROP Assets $ 3,105,503
8. Expected Actuarial Value June 30, 2011 plus Previous Year’s Unrecognized Asset
Gain/(Loss) (5.+6.+7.) $ 633,705,362
9. Market Value June 30, 2011 $ 713,175,855
10. 2009/2010 Asset Gain/(Loss) (9.-8.) $ 79,470,493
11. Asset Gain/(Loss) to be Recognized as of June 30, 2011 $ (10,967,693)
12. Initial Actuarial Value July 1, 2011 (5. + 7. + 11.) $ 684,063,209
13. Constraining Values:
a. 80% of Market Value (9. x 0.8) $ 570,540,684
b. 120% of Market Value (9. x 1.2) 855,811,026
14. Actuarial Value July 1, 2011 (12), but not less than (13a), nor greater than (13b) --
rounded to nearest 1,000 $ 684,063,000
SECTION 3.4 Page 23
AVERAGE ANNUAL RATES OF INVESTMENT RETURN
Year Ending
June 30
Actuarial Value Market Value
Annual Cumulative Annual Cumulative
1990 8.6% 8.6% 12.8% 12.8%
1991 8.6% 8.6% 9.0% 10.9%
1992 9.7% 9.0% 13.8% 11.8%
1993 9.9% 9.2% 11.1% 11.7%
1994 8.6% 9.1% (0.5%) 9.1%
1995 9.3% 9.1% 16.5% 10.3%
1996 11.4% 9.4% 18.7% 11.5%
1997 12.5% 9.8% 16.8% 12.1%
1998 14.0% 10.3% 17.2% 12.7%
1999 14.2% 10.7% 6.9% 12.1%
2000 12.2% 10.8% 6.0% 11.5%
2001 9.4% 10.6% 1.9% 10.6%
2002 6.5% 10.2% (2.2%) 9.4%
2003 4.0% 9.9% 2.9% 9.1%
2004 5.4% 9.6% 16.1% 9.6%
2005 5.7% 9.3% 9.2% 9.6%
2006 6.6% 9.2% 7.9% 9.5%
2007 10.0% 9.2% 15.6% 9.8%
2008 7.2% 9.1% (8.5%) 8.8%
2009 (7.7%) 8.2% (16.3%) 7.3%
2010 3.5% 8.0% 13.2% 7.6%
2011 5.9% 7.9% 21.8% 8.2%
Annual Returns before 1998 exclude DROP assets.
SECTION 4: BASIS OF VALUATION Page 24
This section presents and describes the basis of the valuation. The census of Members,
actuarial basis and benefit provisions of the System are the foundation of the valuation, since
these are the present facts on which the projection of benefit payments will depend. The
valuation is based on the premise that the System will continue in existence.
Section 4.1 System Members
Section 4.2 Actuarial Basis
Section 4.3 Summary of System Provisions
SECTION 4.1 Page 25
SYSTEM MEMBERS
A. Member Statistics
Inactive Members as of July 1, 2011 Number
Amount of
Annual Benefit
Members Receiving Benefits
a. Retired 898 $ 29,918,860
b. Beneficiaries 273 8,575,204
c. Disabled 71 1,962,020
Total 1,242 $ 40,456,084
Members with Deferred Benefits
a. Vested Terminated 28 $ 399,876
Total 1,270 $ 40,855,960
Deferred Option Plan Members 41 $ 1,633,504
Statistics for Active
Members
Number
Average
Age Service Earnings
As of July 1, 2010
a. Continuing 1,229 40.6 11.9 $ 58,840
b. New 29 33.2 1.0 37,447
Total 1,258 40.5 11.6 $ 58,346
As of July 1, 2011
a. Continuing 1,178 41.2 12.4 $ 59,293
b. New 31 33.4 0.6 36,128
Total 1,209 41.0 12.1 $ 58,699
SECTION 4.1 Page 26
SYSTEM MEMBERS (CONTINUED)
B. Count of Active Members
Years of Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+ Total
Under 20 0
20-24 15 1 16
25-29 87 34 121
30-34 80 101 36 217
35-39 43 52 136 9 240
40-44 35 34 78 51 19 1 218
45-49 16 14 32 27 72 20 2 183
50-54 1 6 10 13 33 40 11 114
55-59 5 9 11 5 14 17 13 3 77
60-64 1 2 7 3 4 3 2 22
65-69 0
70-74 1 1
75+ 0
Total 283 253 311 108 142 81 28 3 0 1,209
C. Average Compensation
Years of Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+ Total
Under 20 0
20-24 37,710 54,562 38,763
25-29 45,851 53,204 47,917
30-34 44,099 56,578 62,932 53,032
35-39 44,924 54,071 64,062 65,853 58,535
40-44 51,595 57,917 63,390 67,169 65,290 57,360 61,665
45-49 44,460 53,651 62,680 65,168 68,663 69,474 69,926 63,939
50-54 38,982 76,454 62,025 58,624 63,811 70,666 72,493 66,753
55-59 48,389 53,841 53,934 52,450 59,789 67,076 74,405 71,863 61,587
60-64 78,176 66,908 62,315 63,781 60,015 68,655 70,335 64,829
65-69 0
70-74 70,576 70,576
75+ 0
Total 45,550 56,075 63,178 64,755 65,965 69,380 73,043 71,863 0 58,699
SECTION 4.1 Page 27
SYSTEM MEMBERS (CONTINUED)
D. Members in Pay Status - Annual Benefits
Attained
Age
Retired Members Beneficiaries
Disabled
Members
Current Payment
Total
No. Benefit No. Benefit No. Benefit No. Benefit
Under 50 27 $ 781,523 15 $ 300,718 3 $ 76,317 45 $ 1,158,558
50-54 67 1,858,964 19 407,805 7 181,545 93 2,448,314
55-59 139 4,490,549 22 620,631 12 301,335 173 5,412,515
60-64 195 6,757,040 28 788,064 15 462,905 238 8,008,009
65-69 184 6,342,940 33 980,065 18 488,001 235 7,811,006
70-74 149 4,998,379 46 1,494,276 7 186,002 202 6,678,657
75-79 86 2,931,988 35 1,252,969 6 164,997 127 4,349,954
80-84 31 1,020,860 28 1,000,738 3 100,918 62 2,122,516
85-89 16 575,121 27 1,037,742 43 1,612,863
90 and over 4 161,496 20 692,196 24 853,692
Total 898 $ 29,918,860 273 $ 8,575,204 71 $ 1,962,020 1,242 $ 40,456,084
E. Terminated Vested and Deferred Option Plan Members - Annual Benefits
Attained Age
Terminated Vested Members Deferred Option Plan Members
No. Benefit No. Benefit
Under 40 7 $ 91,604 0 $ 0
40-44 11 158,258 1 31,727
45-49 3 38,975 3 126,331
50-54 2 37,337 11 399,143
55-59 3 38,256 13 572,602
60-64 2 35,446 12 476,234
65 and over 0 0 1 27,467
Total 28 $ 399,876 41 $ 1,633,504
SECTION 4.1 Page 28
SYSTEM MEMBERS (CONTINUED)
F. Member Data Reconciliation
Active Members Inactive Members
Regular
Deferred
Option
Plan
Deferred
Vested
Members
Retired
Members
Disabled
Members
Bene-ficiaries
Total
As of July 1, 2010 1,258 43 22 886 69 261 2,539
To Deferred Option
Plan (14) 14 0 0 0 0 0
Age Retirements (21) (14) (3) 38 0 0 0
Disability
Retirements (1) 0 (1) 0 2 0 0
Deaths Without
Beneficiaries 0 (2) 0 (4) 0 (12) (18)
Deaths With
Beneficiaries 0 0 0 (22) 0 22 0
Nonvested
Terminations (34) 0 0 0 0 0 (34)
Vested Terminations (10) 0 10 0 0 0 0
Rehires 0 0 0 0 0 0 0
Expiration of
Benefits 0 0 0 0 0 (1) (1)
Data Corrections 0 0 0 0 0 0 0
Net Change (80) (2) 6 12 2 9 (53)
New Entrants
During the Year 31 0 0 0 0 3 34
As of July l, 2011 1,209 41 28 898 71 273 2,520
SECTION 4.2 Page 29
ACTUARIAL BASIS
A. Entry Age Actuarial Cost Method
Liabilities and contributions shown in this report are computed using the Individual Entry
Age method of funding.
Sometimes called “funding method,” this is a particular technique used by actuaries for
establishing the annual actuarial cost of pension plan benefits, or normal cost, and the
related unfunded actuarial accrued liability. Ordinarily the annual contribution to the
system is comprised of (1) the normal cost and (2) an amortization payment on the
unfunded actuarial accrued liability.
Under the Entry Age Actuarial Cost Method, the Normal Cost is computed as the level
percentage of pay which, if paid from the earliest time each Member would have been
eligible to join the system if it then existed (thus, entry age) until his retirement or
termination, would accumulate with interest at the rate assumed in the valuation to a fund
sufficient to pay all benefits under the system.
The Actuarial Accrued Liability under this method at any point in time is the theoretical
amount of the fund that would have accumulated had annual contributions equal to the
normal cost been made in prior years (it does not represent the liability for benefits
accrued to the valuation date.) The Unfunded Actuarial Accrued Liability is the excess
of the actuarial accrued liability over the actuarial value of system assets actually on hand
on the valuation date.
Under this method experience gains or losses, i.e. decreases or increases in accrued
liabilities attributable to deviations in experience from the actuarial assumptions, adjust
the unfunded actuarial accrued liability.
Actuarial Present Value
The current worth (on the valuation date) of an amount or series of amounts payable or
receivable in the future. The actuarial present value is determined by discounting the
future payments at a predetermined rate of interest, taking into account the probability of
payment.
Present Value of Accrued System Benefit (ASC 960)
The present value of accrued system benefits represents the actuarial present value of
benefits which are accrued based on service and salary information as of the valuation
date.
SECTION 4.2 Page 30
ACTUARIAL BASIS (CONTINUED)
B. Asset Valuation Method
The actuarial value of assets is based on a five-year moving average of expected and
market values determined as follows:
• at the beginning of each plan year, a preliminary expected actuarial asset value is
calculated as the sum of the previous year’s actuarial value increased with a year’s
interest at the System valuation rate plus net cash flow adjusted for interest (at the
same rate) to the end of the previous plan year;
• the expected actuarial asset value is set equal to the preliminary expected actuarial
value plus the unrecognized investment gains and losses as of the beginning of the
previous plan year;
• the difference between the expected actuarial asset value and the market value is the
investment gain or loss for the previous plan year;
• the (final) actuarial asset value is the preliminary value plus 20% of the investment
gains and losses for each of the five previous plan years, but in no case more than
120% of the market value or less than 80% of the market value.
SECTION 4.2 Page 31
ACTUARIAL BASIS (CONTINUED)
C. Valuation Procedures
No actuarial accrued liability is held for nonvested, inactive Members who have a break
in service, or for nonvested Members who have quit or been terminated, even if a break
in service had not occurred as of the valuation date.
The wages used in the projection of benefits and liabilities are pay for the year ending
June 30, 2011 (including longevity bonuses). These pays were projected into the
valuation year using the valuation salary scale.
In computing accrued benefits, average earnings were determined using the valuation
salary progression. Historical earnings for the past five years have been retained.
Retired Members were assumed to be married with a beneficiary if a spouse date of birth
was provided on the data tape. For those Members whose data did not have a spouse’s
date of birth, they were assumed to be single.
The impact from the dollar limitation required by the Internal Revenue Code Section 415
for governmental plans was considered in this valuation and was determined not to be
significant on a projected basis.
The compensation limit under IRC Section 401(a)(17) was considered in this valuation.
On a projected basis, the impact of this limitation is insignificant.
No additional liability is being carried for the guaranteed minimum interest rate for the
Deferred Option Plan account balances. Stochastic studies of similar Systems have been
used to quantify the cost of this benefit. Further review and analysis of this liability is
recommended. Please note that this is a volatile benefit and the impact in any one-year
may be large.
All active, deferred vested and deferred option plan members are assumed to elect the
$105 per month retiree medical benefit upon retirement.
The calculations for the required state contribution are determined as of mid-year. This is
a reasonable assumption since the agency contributions, member contributions and State
insurance premium tax allocations are made on a monthly basis throughout the year, and
mid-year represents an average weighting of the contributions.
The contribution requirements are based on total annual compensation rather than total
covered compensation. This is a better reflection of the overall expectations for the
System.
SECTION 4.2 Page 32
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions
Economic Assumptions
1. Investment Return 7.5%, net of investment expenses, per annum, compound
annually.
2. Earnings Progression Sample rates below:
Attained
Service
Inflation Merit Increase
% % %
0 3.25 5.00 8.25
5 3.25 3.75 7.00
10 3.25 2.45 5.70
15 3.25 1.25 4.50
20 3.25 1.20 4.45
25 or more 3.25 1.00 4.25
SECTION 4.2 Page 33
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions
1. Retirement Rates Sample rates below:
Attained
Service
Annual Rates of
Retirement Per 100
Eligible Members
20 23
21 11
22 10
23 10
24 12
25 12
26 20
27 20
28 25
29 30
30 50
over 30 100
or 100% at age 75 without regard to
years of service.
2. Mortality Rates
(a) Active employees RP-2000 Blue Collar Healthy Employees (pre-retirement)
with Generational Projection from RP-2000 study
All pre-retirement deaths are assumed to occur in the line
of duty.
(b) Active employees RP-2000 Blue Collar Healthy Annuitant
(post-retirement) and with Generational Projection from RP-2000 study
nondisabled pensioners
(c) Disabled pensioners RP-2000 Blue Collar Healthy Annuitant (set forward 7
years) No Projection
SECTION 4.2 Page 34
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions (continued)
3. Disability Rates
See table below:
Age
Rate (Per 100
Members)
20 0.004
30 0.108
40 0.346
50 1.040
60 1.900
33% of disabilities are assumed to
be Non-Duty related and 67% are
assumed to be Duty related.
4. Withdrawal Rates See table below:
Service
Range
Rate (Per 100
Members)
0 15.00
2 5.75
4 4.00
6 2.50
8 2.50
10 1.75
15 1.00
20 and over 0.00
SECTION 4.2 Page 35
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Demographic Assumptions (continued)
5. Marital Status
(a) Percentage married: Males: 85%; Females: 85%
(b) Age difference: Males are assumed to be three (3) years older than
females.
Other Assumptions
1. Assumed Age of Commencement
for Deferred Benefits: Age 50.
2. Actuarial Value of Assets: An expected actuarial value is determined equal to the
prior year’s Actuarial Value of Assets plus cash flow
(excluding investment returns) for the year ended on
the valuation date and assuming 7.5% interest return.
The (gain)/loss is measured by the difference between
the expected actuarial value and the market value at
the valuation date. The (gain)/loss is amortized over
five years by 20% per year. The result is constrained
to a value of 80% to 120% of the market value at the
valuation date.
3. Provision for Expenses: Administrative Expenses, as budgeted by the
Oklahoma Law Enforcement Retirement System.
4. Retiree Medical: All active and terminated vested members are assumed
to elect the $105 per month retiree medical benefit
upon retirement, and their surviving spouses are
assumed to continue the benefit.
SECTION 4.2 Page 36
ACTUARIAL BASIS (CONTINUED)
D. Actuarial Assumptions (continued)
Other Assumptions (continued)
5. Deferred Option Plan: Deferred Option Plan (DOP) members are assumed to
remain in the DOP for the maximum of five years
prior to electing a lump sum.
A member is allowed to retroactively elect to join the
DOP as of a back-drop-date which is no earlier than
the member’s normal retirement date or five years
before his termination date. The monthly retirement
benefits and employee contributions that would have
been payable had the member elected to join the DOP
are credited to the member’s DOP account with
interest. The retirement benefits are not recalculated
for service and salary past the election date to join the
DOP. However, the benefits may be increased by any
applicable cost-of-living increases.
The retirement rates reflect both regular retirement
and entry into the DOP. We assume that 50% of
active members who retire elect to retroactively enter
into the DOP.
6. Cost-of-Living Allowance: Members eligible for the automatic cost-of-living
increase are assumed to have their benefits increase by
3.25% per year. Members not eligible for the
automatic cost-of-living increase are assumed to
receive the greater of:
(i) their benefit calculated using their actual final
average earnings.
(ii) their benefit calculated using the top base pay for
active members, assuming 3.25% annual
increases in the top base pay.
7. Cost of Living Increase
Assumption: 0% per year
SECTION 4.3 Page 37
SUMMARY OF SYSTEM PROVISIONS
Effective Date and Plan Year: The System became effective July 1, 1947. The System was
originally known as the Oklahoma Public Safety Retirement
System. The plan year is July 1 to June 30.
Administration: The System is administered by the Oklahoma Law
Enforcement Retirement Board consisting of thirteen
Members. The Board acts as the fiduciary for investment and
administration of the System.
Type of Plan: A defined benefit plan.
Eligibility: All law enforcement officers of the Oklahoma Highway
Patrol (OHP) and Capitol Patrol of Department of Public
Safety, Oklahoma State Bureau of Investigation (OSBI),
Oklahoma State Bureau of Narcotics and Dangerous Drugs
Control (OBNDD), Alcoholic Beverage Laws Enforcement
Commission (ABLE), members of the DPS Communications
Division (Communications), DPS Waterways Lake Patrol
Division (Lake Patrol), Park Rangers of the Oklahoma
Tourism and Recreation Department (Rangers), Inspectors of
the Oklahoma State Board of Pharmacy (Pharmacy
Inspectors), and Gun Smith’s of DPS are eligible upon
employment.
Service Considered: Credited Service shall consist of the period during which the
Member participated in the System or the predecessor Plan as
an active employee in an eligible membership classification,
plus any service prior to the establishment of the predecessor
Plan which was credited under the predecessor Plan for
officers of the OSBI and the OBNDD who became Members
of the System on July 1, 1980, any service credited under the
Oklahoma Public Employees Retirement System (OPERS) as
of June 30, 1980, and for Members of Communications and
Lake Patrol who became Members of the System on
July 1, 1981, any service credited under the predecessor Plan
or OPERS as of June 30, 1981, and for law enforcement
officers of ABLE who became Members of the System on
July 1, 1982, any service credited under OPERS as of
June 30, 1982, and for Rangers who became Members of the
System on July 1, 1985, any service credited under OPERS
as of June 30, 1985, and for Pharmacy Inspectors who
became Members.
SECTION 4.3 Page 38
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
of the System on July 1, 1986, any service credited under
OPERS as of June 30, 1986 and for Capitol Patrol who
became Members of the System on July 1, 1993, any
service credited under OPERS as of June 30, 1993 and
for Gun Smith’s who became Members of the System on
July 1, 1994, any service credited under OPERS as of
July 1, 1994. Members can accumulate up to 6 months 15
days sick leave which counts for pension accrual and
benefits eligibility purposes. Members may also buy back
service with other Oklahoma State Retirement Systems.
Salary Considered: Actual paid base salary received by a Member, excluding
payment for any accumulated leave or uniform allowance.
Lump sum bonuses based on longevity date go into
considered compensation. The lump sum bonus is $250
after 2 or 3 years, $426 after 4 or 5 years, $626 after 6 or
7 years, and so on. If an employee incurs a break in
service in excess of 30 days, his longevity date is changed
to his date of rehire and the longevity bonus amount
becomes $0. If an employee incurs a break in service of
less than 30 days or is on a leave of absence without pay
for more than 30 days, his length of absence is deducted
from his longevity date and the longevity bonus amount
remains the same.
Final average salary means the average of the highest 30
consecutive complete months of considered salary.
Effective July 1, 2002: Members whose salary is set by
statute and retire after 20 years receive a benefit based on
the greater of the member’s highest 30 consecutive
months or the top base pay paid to active members at the
time of payment.
Members whose salary is not set by statute and who retire
after 20 years receive a benefit based on the greater of the
member’s highest 30 consecutive months or the salary
paid to the highest non-supervisory position in the
participating agency at the time payment is made.
SECTION 4.3 Page 39
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
State Contributions: License Agency Fees equal to 1.2% of Drivers License
Taxes, plus Motor Vehicle Inspection Fees equal to 50
cents per motor vehicle inspection sticker less $850,000,
plus 5% of Insurance Premium Tax.
Agency Contributions: 10% of actual base salary.
Member Contributions: Eight (8%) percent of paid salary. Accumulated
contributions are after-tax up to December 31, 1989 and
before-tax after December 31, 1989.
Normal Retirement Benefit:
Eligibility: 20 years of service or age 62 with 10 years of service.
Maximum of age 60 with at least 20 years of service,
unless physically able to continue.
Benefit: 2 1/2% of the greater of final average salary or the salary
paid to active employees as described under “salary
considered” multiplied by the years and completed
months of credited service. There is no maximum on
service.
Form of Benefit: 100% joint and survivor.
Form of Payments: The normal form of benefit is a Joint and 100% Survivor
Annuity if the Member was married 30 months prior to
death. The Joint and Survivor portion continues to eligible
children under 22 if there is no eligible spouse or after the
spouse dies.
Termination:
Less Than 10 Years of Service: A refund of contributions without interest.
SECTION 4.3 Page 40
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
More than 10 Years of Service: If greater than 10 years of service, but not eligible for the
normal retirement benefit, the benefit is payable at the
date the Member would have had 20 years of service in
an amount equal to 2 1/2% of the greater of final average
salary or the salary paid to active employees as described
under “salary considered” multiplied by the years and
completed months of credited service.
Form of Benefit: Lifetime benefit.
Disability Benefit (Duty): Upon determination of disability incurred as a result of
the performance of duty, the normal disability benefit is
the greater of:
1) 2 1/2% of the greater of final average salary or the
salary paid to active employees as described under
“salary considered” times years and completed
months of credited service, or
2) 50% of final average salary.
For members with less than 20 years of service that incur
a line of duty disability due to personal injury of a
catastrophic nature, final average salary is based on the
salary which the member would have received pursuant to
statutory salary schedules in effect upon the date of death
for a twenty (20) years of service member.
Disability Benefit (Non-Duty): Upon determination of disability after three years of
service due to causes other than duty, the benefit equals
the accrued benefit of 2 1/2% of the greater of final
average salary or the salary paid to active employees as
described under “salary considered” times years and
completed months of credited service.
SECTION 4.3 Page 41
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
Death Benefits Payable
to Beneficiaries:
Prior to Retirement (Duty): The greater of:
1) 2 1/2% of the greater of final average salary or the
salary paid to active employees as described under
“salary considered” times years and completed
months of credited service, or
2) 50% of final average salary.
For members with less than 20 years of service that die in
the line of duty, final average salary is based on the salary
which the member would have received pursuant to
statutory salary schedules in effect upon the date of death
for a twenty (20) years of service member.
Prior to Retirement
(Non-Duty): After three years of service, the greater of:
1) 2 1/2% of the greater of final salary or the salary paid
to active employees as described under “salary
considered” times years and completed months of
credited service, or
2) 50% of final average salary.
After Retirement: In addition to the benefits provided under the 100% Joint
and Survivor Annuity, $400 per month is paid for each
surviving child to age 18, or to age 22 if a full-time
student (12 semester hours) in an accredited school of
learning.
Lump Sum: The beneficiary shall receive a lump-sum amount of
$5,000. Effective July 1, 2002, this lump sum is
considered to be life insurance proceeds for tax purposes.
If an active Member dies prior to retirement without
leaving a beneficiary, a refund of the accumulated
contributions made by the Member will be paid to the
estate.
SECTION 4.3 Page 42
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
If the beneficiary is a child, the benefits are payable to
age 18, or to age 22 if a full-time student (12 semester
hours) in an accredited school of learning. If the
beneficiary is a spouse (to whom the Member was
married for at least 30 months prior to death, if the death
was not duty related), the benefits are payable for life.
Postretirement Adjustments: Occasional ad hoc increases for retirees are provided.
COLAs apply to the whole benefit, not the original
benefit. The most recent COLA was 4% for Members
retired as of June 30, 2007, effective July 1, 2008.
Effective July 1, 2002, retirement benefits will be
recalculated to increase in conjunction with increases to
the top base pay for active members.
Postretirement Health
Insurance Benefits: The System will contribute $105 per month or the
Medicare Supplement Premium, if less, toward the cost of
health insurance for annuitants receiving retirement
benefits. These benefits commence upon retirement.
Spouses become eligible for this benefit as of
July 1, 2002.
Deferred Option Plan: A Member who has 20 or more years of service and
continues employment may elect to participate in the
Deferred Option Plan. Participation in the Deferred
Option Plan shall not exceed five years. The members’
contributions cease upon entering the Plan, but the agency
contributions are divided equally between the Retirement
System and Deferred Option Plan. The monthly
retirement benefits that the member is eligible to receive
are paid into the Deferred Option Plan account.
Members can elect to retroactively join the DROP as of a
back-drop-date which is no earlier than the member's
normal retirement date or five years before his
termination date. The monthly retirement benefits and
employee contributions that would have been payable had
the member elected to join the DROP are credited to the
member's DROP account with interest.
SECTION 4.3 Page 43
SUMMARY OF SYSTEM PROVISIONS (CONTINUED)
The retirement benefits are not recalculated for service
and salary past the election date to join the Deferred
Option Plan. However, the benefits are increased by
cost-of-living increases applicable to retired members.
When the Member actually terminates employment, the
Deferred Option Plan account balance may be paid in a
lump sum or to an annuity provider. Monthly retirement
benefits are then paid directly to the retired Member.
This Plan became effective during the July 1, 1991 to
June 30, 1992 Plan Year. The Deferred Option Plan
account is guaranteed a minimum of the valuation interest
rate for investment return, or 2% less than the fund rate
of return, if greater.